Moody’s downgrades health insurers, citing Obamacare

Warns of ‘unstable and evolving regulatory environment’

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The nation’s health insurers have been damaged by the shaky Obamacare rollout, a top credit-rating agency said as it downgraded the industry’s outlook Thursday — even as new numbers suggested President Obama’s health law is showing some successes.

Moody's Investors Service analysts said Thursday that the administration’s repeated changes to the rules and problems with getting younger Americans to sign up for the new insurance “exchanges” make it difficult to know if health insurers will end up with the customer base they need to make the economics of Obamacare work out.

But at least in the immediate term, the law does appear to be helping more people gain coverage, according to the Gallup-Healthways Well-Being Index, which showed the rate of uninsured dropped 1.2 percentage points in January, falling to 16.1 percent of the U.S. population overall.

Private insurance options and Medicaid coverage kicked in for millions of people on Jan. 1, the same day the “individual mandate” requiring almost all Americans to hold insurance took effect.

The new numbers “show that the law is working,” White House adviser David Simas said.

But excitement over the numbers was dampened by Moody's, which downgraded its outlook for U.S. health care insurers from “stable” to “negative,” citing uncertainty stemming from Obamacare.

The White House has changed the playing field on the fly in recent weeks to ameliorate the consequences of the law, after an estimated 4 million to 5 million Americans lost existing plans that did not comply with Obamacare standards. The move came on top of other last-minute changes, such as a decision in July to delay the so-called employer mandate from 2014 to 2015, or after the midterm elections.

Moody's said those changes have unsettled the marketplace.

“While all of these issues had been on our radar screen as we approached 2014, a new development and a key factor for the change in outlook is the unstable and evolving regulatory environment under which the sector is operating,” Moody's said. “Notably, new regulations and presidential announcements over the last several months with respect to the [Affordable Care Act] have imposed operational changes well after product and pricing decisions had been finalized.”

Republicans opposed to the new national health care law seized on the report.

Moody's latest downgrade is further evidence that the president’s health law is not the right prescription for reform,” said House Energy and Commerce Committee Chairman Rep. Fred Upton, Michigan Republican.
“Health care should be about providing peace of mind, not generating costly rules and regulations that foster an environment of tremendous uncertainty and confusion.”

Vice President Joseph R. Biden singled out “peace of mind” as one of Obamacare’s top advantages in a speech Thursday to health care advocates in Washington.

He said part of the White House’s objective “is not only to make sure you have adequate health care, it’s to give people peace of mind, for a mom or a dad to be able to turn around and say with confidence when they look in their child’s eye when they’re sick and say, ‘Honey, it’s going to be OK.’”
But doubts about the law linger, even as Moody's survey noted.

“In 2015, insurers will need to deal with the implications of the employer mandate and the second year of the individual mandate,” Moody's said. “Both require substantial lead time with respect to product development and pricing. Ad hoc changes to these provisions, as experienced at the end of 2013, would add additional risks and financial uncertainty.”

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