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Moody’s downgrades outlook for health insurers over Obamacare concerns

Moody’s downgrades outlook for health insurers over Obamacare concerns

Many have addressed the issue of uncertainty created by the implementation of Obamacare and noted the impact that may have on a variety of areas, including for the health insurance industry.

On Thursday, Moody’s Investors Service downgraded its outlook for health insurers, citing such uncertainty.

From Moody’s:

Moody’s changed the outlook for US health insurers to negative from stable, as implementation of the Affordable Care Act (ACA)continues to create uncertainty for the industry, says Moody’s Investors Service in its new industry outlook “US Healthcare Insurers: Outlook Changed to Negative from Stable.”

The ACA—signed into law in March 2010—seeks to increase affordability of health insurance and expand both public and private insurance coverage through a number of mechanisms including exchanges, mandates and subsidies.

“While we’ve had industry risks from regulatory changes on our radar for a while, the ongoing unstable and evolving environment is a key factor for our outlook change,” said Stephen Zaharuk, a Moody’s Senior Vice President and author of the report. “The past few months have seen new regulations and announcements that impose operational changes well after product and pricing decisions were finalized.”

Uncertainty over the demographics of those enrolling in individual products through the exchanges is a key factor in Moody’s outlook change, says the rating agency. Enrollment statistics show that only 24% of enrollees so far are aged 18-34, a critical group in ensuring that lower claim costs subsidize the higher claim costs of less healthy, older individuals. This is well short of the original 40% target based on the proportion of eligible people in this cohort, says Moody’s.

Moody’s also indicates that “the impact of the industry assessment tax that begins in 2014 is unclear.”  Some insurers may have already factored this into their premium calculations, but as Moody’s notes, “the amounts received may still be insufficient to cover their share of the assessment.”

The downgraded outlook from Moody’s also comes on the heels of other news that the administration will replace the lead contractor for after fears that it would not be able to meet its deadline to complete remaining development work.  A recently released document showed that officials worried that if remaining functionality isn’t complete by mid-March 2014, there could be serious risks for the entire health care reform program.


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They’re gonna get a call from TurboTax Timmy, you just watch.

In all seriousness, the downgrade is real. Health insurers don’t know what their costs are going to be and the revenue streams they were anticipating aren’t there. Where did all those young people with money go?

So what they’ll do to try to defend their bottom lines is this: 1) let customer service slip (as Anthem Blue Cross in California is doing now), 2) start contesting what should be routine payments for services, 3) go after the government for the funds supposedly set aside for when they fall short, 4) try to get Congress and/or Obama to bail them out.

More and more I’m convinced that the people who said that Obama rammed the ACA through as a way to destroy the health care system as we know it, so that he could them ram through a single payer system, are on to something.

BannedbytheGuardian | January 24, 2014 at 12:49 am

I doubt America could do a single payer system .unless it recruits programmers from NSA. ( maybe not there either) .

I went for a facial bone analyses scan today for proposed dental work. I had been advised it costs $350 which I took cash. I gave the my health ins card & my details came up & verified . I only needed to pay the outstanding $85 above insurance reimbursement that went directly to them.

To buy a health insurance package we just click on a website sign up & get the card.

Wth is the problem ?

    BannedbytheGuardian in reply to BannedbytheGuardian. | January 24, 2014 at 12:56 am

    Oh & the insurance sites take money . We can offer our tax number & get a federal government rebate taken off directly or adjust it through tax.

    National health & private here – the programming always works . In 20 years I have never had a problem.

    This whole ACA thing is completely baffling.

Now I would like all the hissy-fit throwing Rubio fans to explain why insurers would have their finances downgraded if there is a “bailout.” HINT: it’s because there is no bailout. It’s as illusory as the “enforcement” in Chuck Schumer’s immigration boondoggle, which Rubio was also gaga over.

A “bailout” is when a company screws themselves, like GM and Chrysler, and taxpayers are forced to save them. Here, all the screw-up is the Obama inability to either draft a workable system or execute it, even with tinkering on the fly without congressional approval.


The so-called “risk corridors” only protect insurers from anomalous experience from freak mixes on the exchanges. I think the actual “bailout” is that the federal government covers 80% of the losses OVER 2.4% of premiums paid for the first three years and 50% of the losses over 3% for the next five years. Notice the insurers get nothing at all until their losses become serious, and only part of the losses are covered.

In the insurance business, any losses of claims over current premium income is a huge red flag, a condition which simple cannot be sustained for long. ObamaCare envisioned these subsidies covered by the “windfall profits tax” on other insurers, figuring it all evens out. But it doesn’t even out if young and healthy people don’t participate in sufficient numbers, and they are not, at least not yet.


Based on the admittedly incomplete numbers available so far, at least one major carrier (Aetna) has been willing to speculate on double-digit increases for the next year over the already shockingly high premium rate.

At another blog, someone pointed out that Moody’s is privately owned – by Berkshire Hatthaway/Warren Buffett – a big Obama supporter – AND that the demise of private insurance is the whole idea.

Freddie Sykes | January 24, 2014 at 9:20 am

So many people who signed up for Obamacare cannot get evidence that they have insurance and so many doctors have been excluded from or refuse to accept the PPACA that it will become harder and harder to see a doctor. This coupled with high deductibles and co-pays may lead to insurance claims actually dropping.

Just think of all the money we will saved as a result of people dying while on a waiting list. It works for Canada.