The federal Patient Protection and Affordable Care Act (PPCA) could hurt small U.S. health insurers, causing many to withdraw from the market, be acquired by larger insurers, or even fail completely, according to a recent study by Weiss ratings.
After studying nearly 600 U.S. health insurers, Weiss gave 95 a rating of "weak" or lower, meaning they could be vulnerable to future financial trouble due to higher medical costs, a weak economy, or other factors.
According to Martin D. Weiss, president of Weiss Ratings, certain provisions included in the PPACA, such as the removal of certain reimbursement limits and mandated coverage for pre-existing conditions, will force health insurers to spend more on medical care.
"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," Weiss said.
In addition, the rating agency gave 186 insurers a rating of "fair," saying these companies would struggle to absorb additional costs stemming from PPACA.
Finally, Weiss said that large insurers with abundant capital and solid profits are expected to absorb increase expenses from PPACA and could potentially expand their market share through the acquisition of struggling companies.