OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best thinks some provisions within the American Health Care Act (AHCA) hold the potential to aid health insurance companies in alleviating the profitability issues associated with the current individual markets. A new Best’s Briefing, titled, “Impact of American Health Care Act Is Positive for Carriers Participating in Individual Markets,” reviews the potential impact the AHCA, which was recently passed in the U.S. House of Representatives, and if adopted as law, would replace the Patient Protection and Affordable Care Act (ACA). Some of the AHCA provisions that A.M. Best believes would be positive for health insurance carriers include:
- Via waiver, insurers would be able to charge higher premiums for pre-existing conditions. The bill provides $8 billion of funding from 2018 through 2023 to finance high-risk pools, which would provide assistance with premiums or out-of-pocket costs for impacted individuals;
- Insurers would be able to charge individuals with a gap in continuous coverage of more than two months up to 30% more for the first 12 months of premium, which could ease issues that have developed with individuals purchasing coverage when a medical condition arose;
- States can obtain waivers from annual and unlimited lifetime maximums, as well as waivers beginning in 2020 to redefine essential health benefits; and
- Elimination of the health insurer fee, which should help certain carriers improve margins.
A.M. Best believes some AHCA features also could have a negative impact on health insurers. These provisions include:
- Elimination of the individual mandate, which could cause further deterioration of the risk pool;
- Repeal of the cost-sharing subsidy in 2020 may result more lower-income individuals dropping health coverage. Also, tax credits that would begin in 2020 may be insufficient to cover the cost of comprehensive plans and may cause individuals, particularly older insureds, to drop or scale back coverage as well;
- Waiver or elimination of essential health benefits could result in lower-cost plans and a decline in covered individuals, leading to lower revenue that could weaken insurers’ growth prospects; and
- Pressure on the funds available to the states for Medicaid could result in longer-term uncertainty and potential revenue compression for Medicaid carriers.
A.M. Best notes that although the bill intends to remove or ease some of the ACA’s rules and limitations, it also leaves the ability to regulate the market to U.S. states. If the current bill becomes law, the health insurance market may return to pre-ACA dynamics, when the way health insurance policies were designed, priced, and sold varied significantly by state.
To access a complimentary copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=261758.
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