It's almost year two of Obamacare enrollment, but carriers continue to struggle finding their footing among the exchanges. Moody's analysts said Tuesday that carriers selling their products on the exchanges will struggle with a year of "risks and unknowns."
Analysts highlighted the major risks carriers will face this year as a result of the Patient Protection and Affordable Care Act in a new report.
Chief among them was the "requirement to submit premium rates for 2015 before credible financial data on polices sold in 2014 became available," Moody's analysts said in new report.
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"Due to remaining uncertainties and unresolved issues with respect to the profitability of policies sold under the ACA, consumer behavior, and the legal status of subsidies, insurers are faced with making pricing decisions for 2015 with limited claims data in a competitive marketplace ripe for irrational pricing," says Moody's senior vice president Steve Zaharuk.
Reports over 2015 premium costs have fluctuated wildly. Recent research, though, has pointed to modest increases in most major markets driven by increased carrier competition.
Moody's also cited concerns over less participation in health plans among younger, healthier consumers, which would lower the quality of the risk pool.
"The risk is that as the monthly premium bills become a financial annoyance, especially for those not receiving a premium subsidy, and as individuals realize they will be unlikely to meet the high policy deductibles, many may lapse their polices before the end of the year," Zaharuk said.
Moody's cited data that 29 percent of policies last year were purchased by those in the 18-to-29 age group.
Zaharuk also said legal uncertainties over the federal subsidies — spurred by two contradictory court rulings in July on the legality of subsidies under PPACA — is problematic for carriers.
Despite the challenges, Moody's said it doesn't expect — at least not yet — carrier credit ratings to hurt over PPACA's exchanges given that they "make up a small relative share of their overall business."
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