Carriers will suffer from latest PPACA extension, Moody’s predictsNews added by Benefits Pro on April 1, 2014
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By Kathryn Mayer

Moody’s Investor Services has not been shy about criticizing the Obama White House on its PPACA delays and other moves and the administration's latest extension is no exception.

The ratings service said Monday that the law’s open enrollment extension is "credit negative" for carriers because it increases the risk of anti-selection and will likely lead to higher premiums in 2015, further discouraging enrollment.

Last Wednesday, the administration announced it will grant extra time to consumers to complete commercial coverage applications in the states where it runs the public exchanges.

HHS officials said they aren’t officially changing Monday's individual qualified health plan enrollment period for everyone, but they’ll make a special enrollment period available to consumers who start the individual plan application process by March 31 but failed to complete it.

“Although the agency aims for the extension to apply to a limited number of situations, the reality is that anyone can claim they tried to enroll into the exchange before the original deadline and receive an extension because HHS requires no documentation verifying enrollment attempts,” Moody’s analyst Steve Zaharuk wrote in his report.

Also read: What to know about the March 31 deadline

The first problem for carriers is that the extension exposes them to anti-selection.

“Although the broad opportunity for anti-selection is limited to a few weeks, the more liberal extension of the (special enrollment period) prolongs the risk for insurers well beyond mid-April,” Zaharuk said. “Since these extensions were not previously contemplated by insurers, it is unlikely that insurers factored them into their premium rates. As a result, we expect that the losses insurers were projecting for this block of business will be greater than they anticipated.”

Moreover, he said, because carriers must finalize their 2015 premium rates in May and June, there is almost no time to assess the medical status of these late-enrolling members and build those findings into their rates.

The ongoing cycle of administrative delays and extensions to the law are causing carriers to become wary, and as a result, Moody’s predicts they will become more conservative in their premium assumptions, which will result in higher premiums next year.

As for the argument that carriers will benefit from additional enrollment because of the extension? Not so, Moody’s says.

“We question whether another two weeks or so will sway these individuals, who have already had six months to enroll. Although the Obama administration has been highlighting the effect of the financial penalties that the federal government will impose on those who do not purchase health insurance, the numerous hardship exemptions from the financial penalties that have been granted and the lack of any supporting documentation required to obtain an exemption have undermined their argument.”

Moody’s has been critical of the repeated changes to the law. In late January, Moody’s downgraded its outlook for the health insurance sector to negative from stable, citing the uncertainty caused by PPACA.

Originally published on BenefitsPro.com
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