It's tempting to draw parallels between PPACA and Medicare.
But the Patient Protection and Affordable Care Act exchange system will probably be bigger, more complicated and less flexible than the Medicare Advantage Part D prescription drug program.
Despite that, other similarities suggest carriers still would be able to create successful plans for them. Hans Leida, a consulting actuary at Milliman, makes that case in a new commentary.
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He focused on just the individual exchange market, but its performance could affect how easily employers can replace traditional group health plans with "defined contribution" plans that offer employees cash they can use to then buy their own individual coverage.
Leida noted in the paper that, back in the early 1990s, an actuarial task force suggested one of the primary drivers of market risk was barriers to raising inadequate rates quickly.
Regulators have placed several restrictions on Medicare drug plans, including rules requiring carriers to file drug plan rates far in advance, Leida wrote.
Now, issuers of individual exchange plans also will have to file rates anywhere from six to nine months in advance, with no chance to correct rates until the next bid cycle, Leida said.
But the public exchanges will have risk abatement programs similar to those in the Medicare drug program, Leida said.
Although Medicare drug program carriers face many challenges, the program "has been profitable for a wide range of insurers since its inception," Leida said.
Given how popular the Medicare drug program has been with both carriers and consumers, it seems as if the PPACA exchange plan also could be an attractive market for carriers, Leida concluded.
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Allison Bell
Allison Bell, a senior reporter at ThinkAdvisor and BenefitsPRO, previously was an associate editor at National Underwriter Life & Health. She has a bachelor's degree in economics from Washington University in St. Louis and a master's degree in journalism from the Medill School of Journalism at Northwestern University. She can be reached through X at @Think_Allison.
