Last week’s move allowing consumers another two years to keep non-PPACA compliant plans was, according to the administration, a good one that provides greater flexibility for everyone.
But it could be bad news for carriers.
In a new brief out Monday, Moody’s said the extension is credit negative for carriers because it “adds more uncertainty about the risk profile of the pool of individuals purchasing insurance on the health care exchanges and delays stabilization of the policy.”
“We expect that the insurance risk pools under the exchanges will not improve and may deteriorate,” report author Steve Zaharuk, Moody’s senior vice president, wrote.
Last Wednesday, the Obama administration announced consumers can keep their non-compliant health plans until Oct. 1, 2016. That announcement followed November’s original extension through 2014, which came after backlash over President Obama’s broken campaign promise that if patients “liked their insurance plans they could keep them.”
Moody’s said with the latest extension they expect pools to become riskier, as healthy individuals who maintained noncompliant health insurance policies before the PPACA’s implementation likely will retain their policies, pushing older and sicker individuals into the exchanges.
“Therefore, we expect that insurers will use more conservative pricing assumptions to set their 2015 premiums to reflect not only the uncertainty resulting from the changes made by CMS, but also their lower-than-expected enrollment levels and the older demographics of enrollees,” the report said. “The resulting premiums could further discourage healthy and younger individuals from enrolling. With the two-year extension, the migration of these individuals into the health insurance exchange risk pool will be further delayed.”
However, the report said November’s original extension was more painful because it wasn’t as expected.
“The credit effect from this latest two-year extension is somewhat less negative because insurers will be able to reflect the change in their 2015 pricing,” Zaharuk wrote.
Moody’s has been critical of the repeated changes to the law. In late January, Moody’s downgraded its outlook for the health insurance sector to negative from stable, citing the uncertainty of PPACA.