Fitch Ratings says allowing individuals to renew health plans that don't meet the requirements of the federal healthcare reform law could have a negative effect on the profits of insurance companies.
The ratings agency deems the policy change, announced Thursday by President Barack Obama, as a net credit negative for insurers.
“The policy extensions could lead to deterioration in the risk pool characteristics of the ACA's health insurance exchanges that were not contemplated when the exchanges' premium rates were set,” Fitch said in its assessment. “This would likely lead to the profitability of health insurers' exchange-sourced business falling short of expectations.”
Insurers set their premiums for 2014 under the assumption that everyone would be required to obtain coverage that meets the requirements of the Patient Protection and Affordable Care Act. But if some customers remain in noncompliant plans, that could reduce the revenue of firms participating in the state and federal exchanges. It's anticipated that healthier people would be likelier to stay with their current plans, skewing the risk pool in the new exchange plans toward sicker people.
Facing a backlash from hundreds of thousands of people whose current plans have been canceled, Obama announced that individual and small group plans could be renewed for 2014, though insurers would not be allowed to sell those plans to new subscribers. It will be up to state regulators and insurers themselves to decide whether to renew those plans.
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