The American Health Care Act may result in different health benefit regulations among states, leading to widening divergence between health insurers' operating strategies and financial results, according to Fitch Ratings.
Here are five things to know.
1. Under the AHCA — Republicans' ACA repeal and replacement legislation, which was approved by the House of Representatives last week — states would be allowed to seek waivers from the ACA's essential health benefits requirement and its community rating rule.
2. Fitch analysts predict insurers operating in states with waivers will have more flexibility when underwriting and designing their products than they have under the ACA. As a result, the "enhanced flexibility is likely to generate more variability among individual insurers' financial results, product offerings and marketing strategies," according to Fitch.
3. The AHCA also seeks to dismantle the ACA's individual mandate, which requires Americans to pay a fine if they do not enroll in a health insurance plan. Fitch analysts predict removal of the individual mandate could lead to fewer healthy individuals purchasing insurance through the private market, increasing the underwriting risk for payers.
4. Fitch said other portions of the legislation — which propose premium penalties for lapses in coverage and shifting the least healthy consumers into high-risk state pools — may mitigate this underwriting risk.
5. As for the AHCA's proposed changes to Medicaid funding, Fitch said insurers with large Medicaid-focused businesses could be adversely affected. However, this effect might be offset by states' "desire for budget certainty, leading them to expand risk-sharing with private insurers as a part of managed Medicaid" programs.
Fitch analysts concluded the "fundamental outlook for the health insurance sector is negative, partly reflecting the regulatory uncertainty that has surrounded the sector since the November 2016 elections."
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