A.M. Best Briefing: Affordable Care Act Repeal Could Be a Mixed Bag for U.S. Health Insurers

Insurance Business Weekly

By a News Reporter-Staff News Editor at Insurance Business Weekly -- A.M. Best has reviewed some major provisions of the Patient Protection and Affordable Care Act (ACA) and has evaluated the potential risk to U.S. health insurers if these provisions were part of a repeal, which seems likely given President Trump's agenda and the Republicans control of Congress. This review, detailed in a new A.M. Best briefing, found that premium and cost-sharing subsidies, if repealed, represent a significant risk to health insurers.

The Best's Briefing, titled, "Potential Impacts of the Repeal of the ACA," notes that there are no specifics yet on the components of the repeal or replacement plans for the ACA, and as a result, the evaluation considers just the impact from the repeal and does not consider what may be modified as part of a replacement plan.

The following are some highlights of the review: Premium Subsidies: As premium rates have grown, the government's portion, or the premium subsidy, has increased as well. A.M. Best believes that if the premium subsidies are included as part of repeal without similar replacement, insurers could be significantly impacted and face a substantial premium shortfall. Cost-Sharing Subsidies: Since a U.S. federal court has already ruled that cost-sharing subsidies were illegal, A.M. Best believes that there is a high probability that they could be eliminated as part of a repeal. Similar to the premium subsidies, if the cost-sharing subsidies were to be removed, health insurers could be left with a significant shortfall to cover claim costs. Federal Exchanges/Small Business Health Options Program: Should federal exchanges go away under repeal, insurers could be left scrambling to find an alternate distribution. For those carriers who tend to lean on the exchanges for marketing, the removal of this source could be detrimental. Expansion of Medicaid: If expansion of Medicaid is removed as part of a repeal, A.M. Best believes considerable membership declines could occur at health carriers that participate in Medicaid managed care. The briefing notes that Medicaid has become the leading source of growth for many carriers as well as a material source of operating earnings. Individual Mandate: A.M. Best thinks that the potential removal of the individual mandate would have a medium risk to insurers in the near term, as many younger or healthier individuals have been opting to forgo coverage and pay the penalty as it is substantially lower than the cost of premium. However, over the longer term, the lack of a mandate could be a higher risk to insurers as it leads to worsening of the risk pool as the healthy may forego purchasing insurance.

A.M. Best will continue to monitor the progress of the repeal and replacement of the ACA.

To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=257915. A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED. View source version on businesswire.com: http://www.businesswire.com/news/home/20170124006403/en/