What the AHCA means for insurers: 7 things to know

Health insurers face a myriad of changes under the GOP's proposed plan to repeal and replace the ACA. However, the ways in which the American Health Care Act may affect payers vary across the industry.

Here are seven thoughts on how the legislation may affect health insurers.

1. Changes proposed by the AHCA could influence an insurer's operations depending on the payer's ACA exchange footprint, what percentage of its business is tied to Medicaid and the final details of the bill, according to a USA Today report. For insurers that largely administer Medicaid programs, proposals like scaling back the program's expansion could "become a significant credit and rating risk," Fitch Ratings states.

2. Michael Newshel, managed care analyst at Evercore ISI, told USA Today insurers such as St. Louis-based Centene, which covers about 1 million Medicaid beneficiaries, particularly "benefited" from Medicaid expansion under the ACA. According to data from Standard & Poor's 500 stock index, the St. Louis-based insurer saw its net income increase at an annualized rate of 50.5 percent between 2014 and 2016. In comparison, Bloomfield, Conn.-based Cigna saw its profit rise 8.1 percent, while Louisville, Ky.-based Humana reported a 21 percent decrease in net income during the same period, according to the report.

3. In regards to overall earnings, larger, more diverse payers such as Minnetonka, Minn.-based UnitedHealth Group may be only marginally affected by the AHCA, according to Fitch Ratings. Smaller and less diverse payers may be materially affected by some of the AHCA's proposals in the long-term, including Medicaid reform.

5. Additionally, the AHCA proposes eliminating the ACA's individual mandate requiring Americans to purchase insurance or face a fine. The proposal, along with a decrease in the number of individuals covered by Medicaid, may result in millions of Americans losing coverage, analysts said. This means payers would insure fewer people and lose revenue as a result.

6. However, other proposals outlined within the legislation, such as allowing payers to increase premiums by 30 percent for individuals purchasing plans after a gap in coverage and allowing insurers to charge older policyholders five times the amount charged to younger individuals, could offset lost revenues and be positive for insurers' profitability, according to Fitch.

7. Fitch analysts concluded if the AHCA is implemented as currently drafted, the health insurance industry's outlook will likely remain "unchanged."

"That said, in a bill of this scale, unintended and unforeseen consequences are also likely to create some level of uncertainty as to the net effect for health insurers," according to Fitch.  

More articles on payer issues:
Children's Minnesota dumps contract with BCBS
Iowa Medicaid payers report more than $100M in losses in 2016
Anthem Blue Cross adds Medicare supplement plans in Missouri

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