More Obamacare News: Moody’s Downgrades Health Insurers

I have no idea if Moody’s is taking account of the bailout that was intended all along for the health insurers. Perhaps they are not considering it or perhaps they have decided there is not political will to do it. Or maybe they have decided that even with a bailout the value of the companies will go down.

The bottom line is that, as far as they are concerned, the Affordable Care Act has made the industry an economically more doubtful place to put one’s money.

Thus, the Washington Times:

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.”

It is hard to know what to think of this. Of course, if Moody’s was accurate, they would downgrade everything because stocks could drastically tumble at any time. These are the people who considered the real estate bubble a safe investment. So they’re not all that trustworthy.

But in this case, Moody’s has reasons. Business Insider provides some more details that they give to explain the downgrade:

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.

Just another “benefit” of the Affordable Care Act.