Last week's ruling by a U.S. appeals court that the government can't give financial assistance to anyone buying coverage on the federally-run exchanges is a "credit negative" for carriers, Moody's Investor Services said Monday.
The reason, Moody's said, is because the ruling threatens the status of in-force policies sold through the federal exchange and skews future sales to a less healthy population.
And the contradictory ruling by the Fourth Circuit Court of Appeals in Virginia only adds to the uncertainty of the situation.
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"Lapses among the 4.6 million subsidized policies sold through the federal exchange would likely increase because policyholders may no longer be willing or able to afford the policy premiums without the financial assistance that the premium subsidies provide," wrote Steve Zaharuk, Moody's senior vice president. "Insurers that sold a significant number of policies would be the most affected. These include Aetna Inc., Humana Inc., and WellPoint, Inc."
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Each of those carriers sold approximately 500,000 policies or more in multiple states, including many that utilized the federal exchange, Moody's said.
According to the Department of Health and Human Services, of the 8 million individuals who bought insurance under PPACA, nearly 5.4 million did so through the federal exchange, and around 86 percent of those 5.4 million, or 4.6 million, received a subsidy.
Only 14 states, and the District of Columbia, built state exchanges for the 2014 enrollment period.
Moody's said the ruling forces carriers to rethink expansion and pricing strategies for the 2015 open enrollment period, which begins Nov. 15.
"Many insurers have already submitted their plans and premium rates for 2015 to the Centers for Medicare & Medicaid Services. However, the court's ruling changes the calculus regarding insurers' marketing and pricing assumptions. If subsidies are no longer available in the states that plan to rely on the federal exchange in 2015, the profile of the potential insurance purchaser in these states would drastically change.
Under a no subsidy scenario, Zaharuk continues, "insurers expect the exchanges would attract a less healthy population because only those who most need insurance coverage would likely purchase an unsubsidized health plan. As a result, insurers have indicated that if the ruling were upheld, it would lead to higher premiums. Absent a resolution of the issue before the next open-enrollment period begins later this year in November, we expect that insurers will either revise their premium submissions or withdraw from some exchanges."
Ultimately, Moody's said it expects the Supreme Court to decide the case.
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