Subsidy Appeal in D.C. Circuit Could Hamper Health Insurance Growth: 4 Things to Know From Fitch

A decision by a three-judge panel of the D.C. Circuit Court of Appeals in Washington holding that tax subsidies to low- and middle-income Americans may not be provided in states that use the federally-run health insurance exchanges could reduce growth prospects for health insurers, according to Fitch Ratings.

Although the appeals court in Washington held the federal government cannot provide subsidies for those who used the federal marketplace to purchase their insurance, the future of the PPACA subsidies is still unclear due to a conflicting opinion that was issued in an appeals court in Virginia.

A three-judge panel in a Virginia appeals court ruled individuals in any state could receive health insurance subsidies, as that supports the intent behind the PPACA, which is to expand insurance coverage in the U.S.

The ultimate fate of the subsidies will likely be decided by the U.S. Supreme Court, but if the decision from Washington is upheld, it could negatively affect U.S. health insurers.

Here are four things to know about how health insurers could be negatively affected by the elimination of the subsidies, according to Fitch.

1. The disruption to the subsidies would raise the price of health insurance plans offered on the exchanges and reduce the attractiveness of the plans to consumers.

2. The elimination of the subsidies would add uncertainty around enrollment trends and the profitability of companies offering insurance plans on the exchanges.

3. If the Washington decision is upheld, it would reduce growth prospects for health insurance companies offering plans on the exchanges, as those health insurers have been relying on exchange sourced business as a source of enrollment and revenue growth.

4. The growth some health insurance companies have seen through the exchanges has acted as a margin compression mitigant from the implementation of fees designed to fund certain PPACA provisions and lower Medicare Advantage funding levels. However, if the Washington ruling stands, the effectiveness of exchange-related growth as a margin compression mitigant is likely to be significantly reduced.

More Articles on PPACA Subsidies:

Fourth Circuit Contradicts D.C. Circuit Concerning PPACA Subsidies
Subsidies in 36 States Thrown Out By Appeals Court: 5 Things to Know
Federal Judge Dismisses Senator's Lawsuit Over PPACA 

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