Late News: State insurance exchanges may introduce risk, Moody's says

A credit analyst for not-for-profit healthcare providers cautions that the new state health insurance exchanges may introduce more short-term risk than benefit. Moody's Investors Service said in a report Friday that while the exchanges may lead to a bump in the number of insured patients, there are larger unknowns tied to insurance contract terms; the potential migration of patients who currently have private insurance to exchange plans; and bad debt likely to rise with patients' cost-sharing burden. Because the exchange plans have to offer affordable premiums while still providing mandated levels of coverage, Moody's anticipates that reimbursement levels to providers will be lower than in standard commercial plans. The exchange plans are also likely to feature more cost-sharing, particularly for bronze-tier plans, which only pay for an average of 60% of subscribers' medical costs and thus will have high deductibles and co-insurance. Moody's predicts that the least financially secure individuals are most likely to choose a bronze plan. In addition, Moody's said it expects some adverse selection in exchange plans in 2014 as healthier people opt to pay the tax penalty for not buying insurance. At the same time, some employers are electing to end their health benefit programs and directing employees to the exchanges—where they may or may not choose to buy coverage.