Moody’s Investors Service on Thursday downgraded its outlook on U.S. health insurers from stable to negative, citing concerns with the implementation of the Affordable Care Act.
In its announcement, Moody’s said that the Affordable Care Act has continued to “create uncertainty for the industry.”
“While we’ve had industry risks from regulatory changes on our radar for a while, the ongoing unstable and evolving environment is a key factor for our outlook change,” said Stephen Zaharuk, a Moody’s Senior Vice President and author of the report. “The past few months have seen new regulations and announcements that impose operational changes well after product and pricing decisions were finalised.”
The past few months have been full of problems for President Barack Obama’s signature health-care law. For much of October and November, website glitches led to low enrollment numbers. Though most of those website issues have been resolved, Moody’s cited concerns with the demographic breakdown of enrollments.
Specifically, Moody’s said it was disconcerting that only 24% of enrollees so far have been between the ages of 18-34, when the original target for this group was around 40%. If the trend continues without enrollment from the young and healthy to balance out the older and sicker, it could lead insurers to increase rates.
Moody’s also cited a concern that insurers’ premium calculations could be insufficient to cover the industry assessment tax — the new tax on medical devices that begins in 2014.
“These changing dynamics will have an uneven effect on insurers, as the impact of these factors will vary by market segment and geography,” the agency said in its announcement.
“Moody’s view continues to be that the larger and more diversified insurers will be better positioned, both financially and strategically, to meet the challenges facing the sector.”
In separate, better news for the health-care law on Thursday, Gallup reported that the U.S. uninsured rate had dropped to 16.1% in January from 17.3% in December, driven by the unemployed and nonwhites.
Business Insider Emails & Alerts
Site highlights each day to your inbox.