If the Patient Protection and Affordable Care Act is upheld, it could have negative credit implications for health insurers even though their coverage base will increase, according to a report from Moody's Investors Service.
Moody's analysts looked at three general scenarios: The Supreme Court upholds the entire law; the Supreme Court strikes down the individual mandate and says it is not severable from the rest of the law, thus striking down the entire law; or the Supreme Court finds the individual mandate is unconstitutional, but the rest of the PPACA can stand.
If the PPACA stands, health insurers will face the regulations and restrictions mapped out in the law, including the medical loss ratio and aggressive reviews of rate increases. In addition, Moody's analysts said employers may eliminate their health insurance programs in favor the health insurance exchanges and individual mandate, thus putting more pressure on health insurers.
If the entire healthcare law is thrown out, this would be seen as a credit positive for health insurers, according the report. The third scenario, in which the individual mandate is thrown out but other provisions stand, is "less credit negative" than the first scenario, but it still would not be favorable as the medical loss ratio requirements, Medicare Advantage cuts and additional taxes and assessments would still be at play.
Moody's analysts looked at three general scenarios: The Supreme Court upholds the entire law; the Supreme Court strikes down the individual mandate and says it is not severable from the rest of the law, thus striking down the entire law; or the Supreme Court finds the individual mandate is unconstitutional, but the rest of the PPACA can stand.
If the PPACA stands, health insurers will face the regulations and restrictions mapped out in the law, including the medical loss ratio and aggressive reviews of rate increases. In addition, Moody's analysts said employers may eliminate their health insurance programs in favor the health insurance exchanges and individual mandate, thus putting more pressure on health insurers.
If the entire healthcare law is thrown out, this would be seen as a credit positive for health insurers, according the report. The third scenario, in which the individual mandate is thrown out but other provisions stand, is "less credit negative" than the first scenario, but it still would not be favorable as the medical loss ratio requirements, Medicare Advantage cuts and additional taxes and assessments would still be at play.
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