Best’s Briefing: No Near-Term Impact to Health Insurers Likely From Texas Ruling Against Affordable Care Act
OLDWICK, N.J.--(BUSINESS WIRE)--Dec 20, 2018--AM Best has commented that the recent Texas ruling overturning the Patient Protection and Affordable Care Act (ACA) should not significantly impact health insurers in the coming year, as the decision will likely be appealed and any resolution to the case is unlikely to occur in 2019.
A Best’s Briefing, titled, “AM Best Comments on the Impact to Health Insurers from Texas U.S. District Court Ruling Regarding the ACA,” notes that the Texas federal judge’s ruling would apply to all provisions of the ACA, not just those that pertain to individual coverage. Major provisions that would be eliminated include pre-existing condition exclusions, rating for health conditions, guarantee issue of coverage and subsidies (i.e., tax credits). Other provisions such as Medicaid expansion, parents’ policies covering children until age 26, minimum medical loss ratio requirements, etc., also are included in the ruling.
Health insurers have been impacted negatively by changes to the ACA since the law’s passage, such as the grandmothering of non-ACA policies, a lack of funding for risk corridors and the elimination of the cost-sharing reduction subsidies. However, insurers have priced all of these law changes into rates, leading to profitable results in the segment for many carriers in 2018. There is a year-over-year increase in the number of carriers participating in the exchange marketplace in 2019.
If uncertainty surrounding the ACA continues, AM Best believes that there could be fewer carriers participating in 2020 as carriers are unlikely to tolerate losses in that line of business. There also could be a potential negative impact to Medicaid carriers should Medicaid expansion, which spurred significant enrollment growth, be eliminated. It is unlikely that U.S. states will be able to fully fund the expansion population, which could necessitate a change in eligibility requirements that ultimately would lead to fewer individuals covered by Medicaid. In addition, if a sizeable portion of the currently insured population loses coverage, providers will experience pressure resulting from a rise in uncompensated care, and could increase rates for services paid by health insurance companies. The rate pressure may impact the entire health system, including the group market and Medicare Advantage.
AM Best expects the ACA to remain in effect during the appeal process, and thus does not expect the Dec. 14, 2018, ruling to impact ratings. AM Best will continue to monitor the regulatory environment and the future steps in this court case.
To access the full copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=281553.
AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.
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SOURCE: AM Best
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PUB: 12/20/2018 10:00 AM/DISC: 12/20/2018 10:01 AM