The mid-term congressional election is less than two months away and some observers wonder whether the event will be all about nothing.
Health insurance exchange (HIE) pricing for investor-owned hospitals is beginning to form, according to Fitch Ratings.
Although final details regarding the structure and pricing of the commercial insurance products to be offered in the HIEs have not been cemented, increased clarity is expected during the next few months. HIEs are designed to be structured online marketplaces purposed for the sale and purchase of health insurance by individuals. The HIEs, mandated by the Affordable Care Act (ACA), are expected to be functional by Oct. 1, so that individuals can purchase coverage, effective Jan. 1, 2014.
From the perspective of hospitals, patients with commercial health insurance are typically more profitable than those with government-sponsored coverage, including Medicare and Medicaid. So the expansion of the number of individuals with commercial insurance under the ACA has positive implications for the industry in general.
Along with the expansion of state Medicaid programs, the structure and pricing of the products in the HIEs is one of the most important variables that will determine the financial impact of the ACA on hospitals. The structure of the insurance products offered in the HIEs, including benefit packages, contract terms, and payment rates to providers, are particularly important. These factors will be highly influential in the ultimate boost to revenues and EBITDA that investor-owned hospital companies realize under the insurance- expansion mandate of the ACA.
Hospitals are likely to have to accept lower payment rates than current commercial rates for the HIE plans as insurers are incentivized to keep premiums as low as possible in order to offer competitive products in the HIEs. In some markets, lower rates on HIE products may be offset through higher patient volumes as hospitals could accept discounted pricing to secure inclusion in narrow provider networks.
Looking ahead, we believe the products offered in the HIEs will vary by market, much like the current commercial health insurance market. In addition to narrow networks, there may be opportunities for hospitals to engage in greater financial risk sharing, such as through bundled payment schemes.
Additional information is available on fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at fitchratings.com. All opinions expressed are those of Fitch Ratings.
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