Proposed HIX Enrollment Extension Bad for Insurers

Extending the enrollment period to Americans seeking health coverage under the Patient Protection and Affordable Care Act would negatively affect health insurers and create pricing and logistical implications for them, according to Fitch Ratings.

Open enrollment began October 1 and the deadline for enrollment currently is March 31, 2014. Health insurance exchanges (HIX), including www.healthcare.gov, have experienced technical problems and limited the number of successful purchases, but Fitch says an extension would enable consumers to delay purchases, which could increase the number who wait until they need the insurance to buy it.

An extension also would create logistical issues regarding pricing and state participation that could raise short-term risk for insurers, Fitch said, and delay the benefits of the Affordable Care Act (ACA) for hospitals.

Fitch explains that insurers typically set premium rates prior to enrollment periods based on cost-of-care estimates during the enrollment period. If the enrollment period were to be extended, those cost-of-care estimates could deviate from the original estimates, and while insurers likely would be able to price for that risk, some uncertainty remains.

In response to technological problems with the HIX Web sites, some states also are encouraging state insurance regulators to extend existing policies for three months beyond their Jan. 1, 2014 expiration date, which Fitch said is less problematic for health insurers than an extension of the current enrollment period, assuming that benefits and premiums on the extended policies are unchanged from current levels and the extension is only for a short period.

Extensions, however, could result in a short-term increase in risk levels of business sourced through the exchanges, Fitch said, as the consumers extending those policies likely would have better risk profiles than early users of exchange-sourced insurance.

Insurers with enrollment weighted disproportionally toward exchange-sourced business could be adversely affected financially by the extension, Fitch said. An extension also would be negative for hospitals, because of the potentially higher patient volumes and lower bad-debt expenses related to treating the uninsured.

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