Moody's downgrades outlook for insurance industry to negative, thanks to ObamaCare

Sounds to me like it’s time for a threatening phone call.

They’re laying this right at Obama’s feet, do note:

Moody’s Investor Service has changed its outlook for the U.S. health care insurance sector from stable to negative, citing Obamacare’s rollout and the uncertainty it brings.

The private credit rating agency said potential fallout from the Affordable Care Act’s implementation — including changes to the individual market and the impact of the law’s “employer mandate” on commercial group plans in January 2015 — presents the greatest challenge to health insurers’ credit profile. Lower reimbursement rates among Medicare Advantage plans also are creating financial pressure, it said.

“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 ACA have imposed operational changes well after product and pricing decisions had been finalized.”

Advertisement

First came the president’s panicky, ass-covering call to un-cancel plans, replete with promises to use the law’s bailout provisions to help insurers cover the extra cost. Then came the mandate penalty waivers for people who’d lost their coverage, which treated ObamaCare itself as a “hardship” worthy of an exemption for individuals. Then came the shifting enrollment and payment deadlines in December, creating a backlog of applications that insurers are still coping with. And then came the threat from Sebelius to boot companies from the exchanges next year if they didn’t let people pay their first month’s premium after coverage went into effect on January 1. Hard to believe in hindsight, but that witches’ brew of uncertainty was concocted over just five short weeks, from mid-November to the week before Christmas. The news isn’t that insurers are now an unacceptably unstable investment due to capricious politicized meddling by the feds. The news is that that was inevitable and yet only now is Moody’s getting around to the downgrade. Of course the outlook’s negative, silly.

And the uncertainty’s not going away soon. On the contrary, here’s what Megan McArdle sees in the crystal ball:

Advertisement

· 2014: Small-business policy cancellations. This year, the small-business market is going to get hit with the policy cancellations that roiled the individual market last year. Some firms will get better deals, but others will find that their coverage is being canceled in favor of more expensive policies that don’t cover as many of the doctors or procedures that they want. This is going to be a rolling problem throughout the year.

· Summer 2014: Insurers get a sizable chunk of money from the government to cover any excess losses. When the costs are published, this is going to be wildly unpopular: The administration has spent three years saying that Obamacare was the antidote to abuses by Big, Bad Insurance Companies, and suddenly it’s a mechanism to funnel taxpayer money to them?…

· 2014 and onward: Medicare reimbursement cuts eat into hospital margins, triggering a lot of lobbying and sad ads about how Beloved Local Hospital may have to close.

· Spring 2015: The Internal Revenue Service starts collecting individual mandate penalties: 1 percent of income in the first year. That’s going to be a nasty shock to folks who thought the penalty was just $95. I, like many other analysts, expect the administration to announce a temporary delay sometime after April 1, 2014.

Advertisement

They’ll probably delay or scale back the small-business cancellations too. Why wouldn’t they? Why play this shell game of moving around deadlines and granting exemptions in 2013 to protect the party if they’re going to sit idly by while millions upon millions of people are booted from their employer plans in an election year? This is the deeper point of the Moody’s downgrade: The insurance industry is now essentially a political creature, and politics can change quickly. How’s an investor supposed to assess risk if he or she can’t know whether the president might need to knock over the chessboard at any given moment for his own political interests? Even if you think Obama and the Democrats are so invested in O-Care’s success that they’ll find a way to keep federal money flowing to prop it up, the lingering bitterness after the law was passed on party lines and the recurring fact of potentially game-changing elections means it’ll be years before the industry enjoys real stability. And yet, in partnering with O on sweeping reform in the expectation that it would bring them millions of new customers, this is what insurers signed up for. They bought the ticket. Hope they’re enjoying the ride.

Advertisement

Join the conversation as a VIP Member

Trending on HotAir Videos

Advertisement
Advertisement
Advertisement
Advertisement