Industry Views on ACA

US Insurers Overcome Reform Challenges

A return to a stable outlook

New York, February 26, 2015 — US health insurers have successfully managed challenges from the rollout of the Affordable Care Act (ACA), according to a new report from Moody's Investors Service, "US Healthcare Insurers: Outlook Changed to Stable from Negative as Companies Successfully Navigate Challenges."

"Our revised outlook on the US health insurance sector reflects the insurers' ability to adapt to healthcare reform," says Stephen Zaharuk, a Moody's Senior Vice President. "While ongoing legal and political uncertainties remain, we believe that insurers will continue to minimize these risks over the next 12 to 18 months."

A lower utilization of medical services

The change to a stable outlook also reflects lower utilization of medical services, driven primarily by stronger managed care oversight and higher out-of-pocket costs for patients. Additionally, health insurers achieved promising growth in Medicare Advantage enrollment of over 9% in 2014, despite cuts in government reimbursements to insurers.

Our revised outlook on the US health insurance sector reflects the insurers' ability to adapt to healthcare reform

However, ongoing legal and political uncertainties related to healthcare reform challenge the sector. In particular, if the Supreme Court rules against the ACA's federal subsidies provision, insurers will need to be prepared to react to the implications and shift strategies. In addition, the affordability of health insurance will be an ongoing concern.

Premiums continue to increase, as are out-of-pocket costs because of higher deductibles and co-pays. While insurers are working to curb costs with risk-sharing contracts with providers and other tools, the long-term impact of their efforts is uncertain.

"US health insurers have implemented strategies to cope with an evolving healthcare environment," says Zaharuk. "Beyond 2015, the sector will face ongoing challenges as changes to the Affordable Care Act will require the insurance sector to react and address these changes."