Extending the enrollment period for Americans seeking health coverage under the Affordable Care Act could mean pricing and logistical implications for health insurers, according to Fitch Ratings. According to the Fitch report, “We believe an extension would be a negative for health insurers. Pressure on insurers to extend existing policies is likely less problematic than extending the enrollment period. The current deadline for enrollment is March 31, 2014, although plans will take effect on Jan. 1 for those who sign up earlier.
An extension could increase the number of people who wait until they need healthcare to buy the insurance. The open enrollment period for health insurance plans offered in the insurance exchanges began on Oct. 1 and the process has been plagued with technical problems on websites includingwww.healthcare.gov.
Allowing more time would also create logistical issues with pricing and state participation, which could raise short-term risk for insurers.
Under normal circumstances, insurers set premium rates before the enrollment period based on cost-of-care estimates. When the enrollment period is lengthened, these estimates may no longer be as accurate.
Some state regulators are encouraging insurers to extend existing policies for three months beyond their Jan. 1, 2014 expiration date due to technological problems with exchange websites. Fitch says that this would be less problematic for health insurers than extending the current enrollment period as long as benefits and premiums on the extended policies don’t change from current levels and the extension is effective for a relatively short period.
Nevertheless, such extensions could result in a short-term increase in risk levels of business sourced through the exchanges. Consumers whose policies are extended are likely to have better risk profiles compared to early users of exchange-sourced insurance. The extension could hurt the financial results of insurers whose enrollment is weighted disproportionally toward exchange business.
Fitch also says that an extension would delay the positive benefits that hospitals would see as a result of health reform including higher patient volumes and lower bad debt expenses for treating the uninsured. For more information, visit www.fitchratings.com.
