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Carriers hurt by PPACA enrollment changes

President Barack Obama. (AP Photo/Carolyn Kaster)
President Barack Obama. (AP Photo/Carolyn Kaster)

The latest Patient Protection and Affordable Care Act delays haven’t been good news for an administration still struggling to keep its image despite the law’s rocky rollout.  

The delays aren’t good news for carriers, either.

Moody’s Investor Service says PPACA’s latest delays — including allowing individuals to remain enrolled in non-PPACA-compliant policies for 2014; extending deadlines for 2014 enrollment; and changing the 2015 open enrollment period — are a “credit negative” for carriers, and warn that more changes to the law’s rollout, which they say are now expected, will further negative implications for carriers.

“The recent last-minute administrative changes made by the Obama Administration are credit negative for U.S. health insurers as they expose the sector to additional financial and operational risks,” Moody’s concluded in its latest sector comment.

First, the administration’s backtrack on the cancelled policies are problematic, said Steve Zaharuk, who wrote the report.

“This change will likely have a negative effect on the risk profile of the exchange health risk-pool, should healthy younger members take advantage of this last-minute waiver. The uncertainty created as state insurance commissioners and insurance companies decide whether or not to offer this option to their insured members has further delayed enrollment in the exchanges,” he said.

The 2014 deadline extensions will result in administrative burdens and lost revenue for carriers.

The first change — allowing individuals to wait until March 31 to enroll and avoid a penalty — will result in “insurers losing up to two months of premium on these individuals as a result of the extension,” Zaharuk said. “In addition, it is more likely that younger, healthier individuals will take advantage of this extension, resulting in an adverse risk-pool for the first few months of the year.”

The recent announcement pushing back the individual coverage enrollment deadline to Dec. 23, from Dec. 15, “will cause insurers various administrative problems because they will have to make sure that these individuals have been coded correctly in their systems in time to receive health care benefits on the first of the year,” Zaharuk said. “If there is a surge in enrollment activity in late December as website issues and other uncertainties are resolved, it will be nearly impossible for insurers to complete the enrollment process in time.”

The 2015 enrollment delay also creates several issues for carriers, Moody’s said, including an administrative challenge of enrolling members in time January 2015 over a compressed timeline.

In November, Moody’s issued a sector comment saying PPACA will likely negatively affect earnings in 2014. Though they said last month the situation could right itself, the investor services corporation seemed far less hopeful in its latest report.

Moody’s said more PPACA changes and delays from the administration should be expected.

“Any further enrollment deadline extensions will exacerbate adverse selection and significantly increase the probability that these products will lower insurers’ expected profits, or even result in financial losses for them,” Zaharuk said. “In addition, the administration’s disclosure that the back-end payment system intended to transfer government subsidies to insurers has not been built, casts doubt on the government’s ability to make timely payments to insurers.”

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