Many life insurance company and regulators see health reform legislation as a way to stabilize a system in which the only significant cost-drivers are health costs and the need to sell more insurance policies and retain policyholders. The Affordable Care Act, however, has introduced many changes that will affect insurers’ businesses in the short term, and will continue to have an impact in the years to come. Here are the three biggest challenges that the health care insurance market will face over the next decade and what insurers and regulators are doing to deal with them.
1. Keeping Consumers Engaged
In the private market, insurers who sell individual policies often rely on three components to keep their customers: premiums, customer satisfaction and new policy sales.
Premiums are set to meet customers’ costs, and can be the lowest in the market in a given area if customers are paying on their own or paying a high deductible. They’re also designed to encourage customers to sign up for additional coverage, as they may get a break on premiums or a subsidy if they do.
Customer satisfaction is vital to insurers and their bottom line, and an area where many insurers are making major changes to attract new customers.
If they’re not satisfied, they may drop their policies or leave the market altogether, undermining the stability of the system. They’re also likely to take a hit on the customer experience, which could hurt their ability to retain current policyholders and attract new ones.
And finally, a health insurer needs new policy sales to be profitable, because the premiums the company is collecting from current customers are less than the losses it’s incurring on new customers.
While the Affordable Care Act requires insurers to pay out more in benefits than they are taking in in premiums, new rules in 2015 extended the benefits to most younger policyholders for three years and most older policyholders for a full four years. That could help to stabilize individual-policies losses, but it also makes it easier for carriers to raise premiums for 2017 and beyond.
2. Maintaining Affordable Insurance Rates
Insurers have raised premiums for 2016 in order to keep up with rising costs. But many of the same forces that pushed down the price of insurance are driving it up again in 2017.
Many carriers are raising their premiums for 2017 in order to meet requirements under the Affordable Care Act, particularly for older customers and policyholders who use a lot of their benefits. But the law also provides subsidies for more low- and moderate-income customers, driving their premiums down.
The combination of higher health care costs, less competition and fewer enrollees is going to put pressure on rates again in 2017.
If there’s enough enrollment growth in 2017, then rates may come down again.
Many experts think that carriers will be able to keep premiums from rising higher than they already have in 2018.
But the combination of higher health care costs, less competition and fewer enrollees is going to put pressure on rates again in 2017.
If there’s enough enrollment growth in 2017, then rates may come down again, and carriers may be able to charge lower premiums in 2018 and 2019.
But if they don’t, the situation could get more complicated in the coming years. If premiums are still going up for 2017 and 2018 and the Affordable Care Act remains in place, they may need to be even higher in 2019 and 2020 to help offset the costs.
3.Health Reform in the Future – Life Insurance
Insurers and regulators around the country are looking for ways to solve those challenges.
Carriers in California and Maryland, for example, have proposed increasing the maximum allowable price that they can charge.
In California, regulators have proposed a cap of 138% of the cost-to-charge ratio in a given year. That number would be used as a floor for carriers’ premiums, but could rise or fall based on the number of enrollees in their individual insurance policies and how well their new rates keep up with overall costs.
And some states are looking at allowing insurers to spread the cost of high-cost enrollees among the other insurance policies in their state, or to allow carriers to spread the costs over a longer period of time. Those options may require new regulation or approval, but many of them have been proposed in recent years and are gaining steam.
“Health care costs are rising quickly, so people are looking at innovative ways to try to stabilize the market,” said Chris Conley, director of the health reform and private insurance programs at the Tax Foundation.
State legislatures in a number of states are also considering reforms to Medicaid and the individual insurance market that could impact carriers and their bottom lines.
“We’re facing all kinds of challenges in the individual market,” said John McDonough, the director of the Kaiser Family Foundation’s Program on Medicaid and the State Safety Net Programs.
In addition to potential changes in the Medicaid program, he said, some states are looking to do away with guaranteed issue or community rating rules in the individual market, which prohibit insurers from denying coverage because of pre-existing conditions or the amount of coverage a customer wants.
The combination of more sick people on the individual market, a move to more cost-effective models for providing insurance, a move toward more high-deductible plans and more price competition could mean lower prices for carriers in the future. But it will likely be years before they see the results of those changes.
Search Keywords
new insurance policy
auto insurance for new car
life insurance
insurance
terms life insurance quotes
life insurance quotes
insurance quotes
