The new healthcare reform law will shake up the health insurance industry, squeezing profits of smaller insurers while boosting fortunes of larger plans, and possibly leading to further market consolidation, according to a study by Weiss Ratings.
Larger insurers stand to gain, study says
New rules starting next year that will require insurers to spend between 80% and 85% of member premium dollars on medical expenses could cause some smaller insurers to fail, according to the insurance company rating firm.
Among the 585 insurers analyzed in the report, 353 already meet these so-called medical loss ratios mandated in the Patient Protection and Affordable Care Act. Another 95 companies are at risk of financial problems because of higher medical costs, a weak economy or other outside pressures. And the report identified 186 insurers that could struggle to deal with the added regulations and costs associated with the reform law.
Kaiser Foundation Health Plan, Health Care Service Corp., and Blue Cross and Blue Shield of North Carolina were named as examples of insurers that could come out ahead as a result of health reform.
“Sweeping changes mandated by health care reform, such as the removal of certain limits and mandated coverage for pre-existing conditions, will inevitably force health insurers to spend more on medical care,” said Martin Weiss, president of Weiss Ratings, in a news release. “Most large health insurers will be able to handle it. But we are concerned that weaker, less profitable insurers will be forced out of the market, reducing competition and ultimately leading to fewer choices and higher premiums for consumers.”
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