Market Overview

A.M. Best Briefing: Impact of American Health Care Act Positive for Carriers Participating in Individual Markets


A.M. Best thinks some provisions within the American Health Care
Act (AHCA) hold the potential to aid health insurance companies in
alleviating the profitability issues associated with the current
individual markets. A new Best's Briefing, titled,
"Impact of American Health Care Act Is Positive for Carriers
Participating in Individual Markets," reviews the potential impact the
AHCA, which was recently passed in the U.S. House of Representatives,
and if adopted as law, would replace the Patient Protection and
Affordable Care Act (ACA). Some of the AHCA provisions that A.M. Best
believes would be positive for health insurance carriers include:

  • Via waiver, insurers would be able to charge higher premiums for
    pre-existing conditions. The bill provides $8 billion of funding from
    2018 through 2023 to finance high-risk pools, which would provide
    assistance with premiums or out-of-pocket costs for impacted
  • Insurers would be able to charge individuals with a gap in continuous
    coverage of more than two months up to 30% more for the first 12
    months of premium, which could ease issues that have developed with
    individuals purchasing coverage when a medical condition arose;
  • States can obtain waivers from annual and unlimited lifetime maximums,
    as well as waivers beginning in 2020 to redefine essential health
    benefits; and
  • Elimination of the health insurer fee, which should help certain
    carriers improve margins.

A.M. Best believes some AHCA features also could have a negative impact
on health insurers. These provisions include:

  • Elimination of the individual mandate, which could cause further
    deterioration of the risk pool;
  • Repeal of the cost-sharing subsidy in 2020 may result more
    lower-income individuals dropping health coverage. Also, tax credits
    that would begin in 2020 may be insufficient to cover the cost of
    comprehensive plans and may cause individuals, particularly older
    insureds, to drop or scale back coverage as well;
  • Waiver or elimination of essential health benefits could result in
    lower-cost plans and a decline in covered individuals, leading to
    lower revenue that could weaken insurers' growth prospects; and
  • Pressure on the funds available to the states for Medicaid could
    result in longer-term uncertainty and potential revenue compression
    for Medicaid carriers.

A.M. Best notes that although the bill intends to remove or ease some of
the ACA's rules and limitations, it also leaves the ability to regulate
the market to U.S. states. If the current bill becomes law, the health
insurance market may return to pre-ACA dynamics, when the way health
insurance policies were designed, priced, and sold varied significantly
by state.

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