After Obamacare—What’s Next for Insurance Companies?

The future is full of possibilities for insurance companies.

I have described the likelihood that, in a post-ACA world, the federal government will step back and the states will have more flexibility and responsibility. The next key player in this equation is the insurance industry.

The ACA created a substantial web of requirements and prohibitions that applied to insurance companies—including rules requiring that carriers insure all applicants, that premiums could not vary based on applicants’ health status, that (in effect) younger applicants subsidize the cost of older applicants, and that limited the companies’ profits from health insurance. In effect, the ACA made insurance companies serve as instruments of the ACA’s policy objective of providing health insurance to all. The problem with this use of insurance companies was that they did not feel they were adequately compensated for serving in this capacity.

In the post-ACA world carriers will be given more latitude to identify who they are willing to cover and how they will underwrite and price those coverages. This theme is emerging in recent proposed regulations that start giving carriers more ability to restrict enrollments (by shortening the annual open enrollment period under ACA and by limiting individuals’ ability to enroll in midyear under the ACA’s special enrollment rules).

This theme also emerges in legislative proposals that are starting to emerge—proposals that will move to a common pre-ACA requirement that there be some proof of prior coverage as a part of covering preexisting conditions and easing (or eliminating) the limitations on how insures set premiums.

The key unknown is whether these changes will give the carriers enough control to continue participating in individual and small group markets. Correspondingly, as carriers exert more control over premiums and issuing coverage to those with preexisting conditions, it is not clear how many individuals will lose access to coverage.

Bottom line—as the role of the federal government recedes in a post-ACA world, insurance carriers (along with states) will have more flexibility and responsibility. The implications of this shift will take years to play out.