Rating agencies imagine gentle ACA repeal

Centene and Molina are two example of insurers that are now getting a significant number of enrollees through HealthCare.gov (shown above) and through state-based exchange enrollment systems. (Image: CMS)
Centene and Molina are two example of insurers that are now getting a significant number of enrollees through HealthCare.gov (shown above) and through state-based exchange enrollment systems. (Image: CMS)

The big rating agencies helped determine how much Donald Trump had to pay to borrow money when he developed real estate projects, and now they may play a role in shaping his efforts to kill and replace the Affordable Care Act.

Related: What a Trump presidency means for the ACA

Analysts at the agencies say some approaches to changing or replacing the ACA could be much easier on health insurers than others.

Sudden, complete repeal could slam the health insurers that have been selling large amounts of individual major medical coverage through the ACA exchange system, but a slower, carefully planned replacement effort could help lure the issuers hurt by the ACA in recent years back into the market, the analysts say.

Deep Banerjee and colleagues at New York City-based Standard & Poor’s Financial Services say they think full, sudden ACA repeal would have a much bigger effect on commercial individual health operations than on commercial group health operations.

If, for example, Republicans succeeded at eliminating the ACA exchange plan tax credit subsidy system without replacing it, that “will reduce the affordability of health care plans and result in a significant decline in the number of individually insured [people],” the S&P analysts say.

If Republicans required health insurers to continue to sell health coverage without medical underwriting, but they eliminated the ACA provision that imposes a tax penalty on many people lack what the government classifies as adequate health coverage, that could increase individual health claims and individual health premiums, by encouraging healthier people to drop their individual major medical coverage, the analysts say.

“The mandate in its current form wasn’t as effective as it needed to be, both in terms of the actual penalty and enforcement,” the analysts say.

But having even the current, weak mandate in place is better for premiums than having no mandate at all, the analysts say.

The S&P analysts say any major ACA changes that do occur are much more likely to take effect in 2018 than in 2017.

Easing the pain

Mark Rouck, an analyst in the New York office of Fitch Ratings, says Republicans could still shape any ACA replacement package in a way that would ease the pain for individual health issuers.

“Retaining certain key aspects of the ACA, albeit through the passage of a new law, is a possibility,” Rouck writes in a commentary. “Republicans will likely balance their interests in meeting campaign promises to repeal the act while not alienating voters who had historically been uninsured prior to the ACA’s implementations.”

Dean Ungar and other analysts at New York-based Moody’s Investors Service say Republicans could also ease the pain of ACA Medicaid expansion repeal.

Medicaid expansion repeal would hurt Medicaid plan issuers, but Trump’s ACA replacement plan summary “does include a proposal to replace current federal Medicaid funding with block grants to the states,” the Moody’s analysts write. “If this were to be enacted, it might encourage some states to increase their reliance on the health insurers in providing Medicaid, which would mitigate the loss of the ACA’s Medicaid expansion.”

Republicans could even agree to put something like the ACA Medicaid expansion provision in their ACA replacement package, the Moody’s analysts say.

But all of the analysts emphasize how little they know about what ACA replacement efforts might look like.

Rouck, for example, says he has no way of describing his outlook on the U.S. health insurance sector as “stable,” giving all of the uncertainty surrounding the ACA replacement effort.

Related:

ACA risk adjustment eats 25 percent of Molina exchange revenue

ACA exchanges report strong early application activity

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