Not all insurers will be harmed and not all will be helped under President Trump’s executive order on health care signed last Thursday. It will likely take months for the full impact of the order to reveal itself but in the meantime some guidance can be gleaned.
The negative versus positive affect will most likely depend on the types of policies offered. Companies that offer plans under the ACA will be hurt. Those offering short-term plans to compete with ACA plans will be helped.
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ACA Insurers Hurt
Insurers such as Blue Cross and Blue Shield, Centene Corp. (NYSE:CNCA) and Molina Healthcare Inc. (NYSE:MOHC) that have been selling ACA policies will stand to lose healthy enrollees as rates increase. The loss of healthy buyers will cause rates to increase even more.
Ultimately, some believe, this will create an unstable or super-expensive system filled with sick people, many of whom cannot afford to pay higher premiums for health insurance. The White House said it believes the move will "increase competition, increase choice and increase access to lower-cost, high-quality health care options."
Low Cost Options
Those low-cost options will likely come in the form of cheaper (currently) short-term plans that offer scaled back coverage. These plans will appeal to the healthiest individuals who don’t feel they need coverage since they are rarely sick and have no pre-existing conditions. If regulators allow these plans to be almost a year in length in some cases, they will become popular.
This will be a boon to companies offering these policies since they will be sold primarily to people who don’t need much in the way of health care. Fewer claims means less drain on profits. With most healthy people being driven to low cost plans, companies offering those plans should see an increase in income. UnitedHealth Group Inc. (NYSE:UNHC) is one company that stands to gain sales.
One thing that’s not known is the impact of the president’s executive order on so-called health reimbursement arrangements (HRAs). These are tax-advantaged accounts funded by employers and used for health care expenses.
If employers can use these arrangements to help workers pay premiums on individual plans, this might give employers a cheaper option versus providing a traditional workplace plan. This creates a potential nightmare for companies that sell workplace insurance plans to employers.
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Nothing For NowFor the time being the executive order is not likely to create changes in this year’s enrollment for the ACA. Some changes could take place in 2018, but not for a while and not soon enough to cause a disruption.
If this thinking holds, it’s good news for customers and insurers alike since this would give everyone time to prepare for 2019 and whatever scenario unfolds at that time. Buyers and sellers of health care insurance have limited time and ability to react to changes and the more time they must adjust the better.