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Fitch: ACA Subsidy Elimination Could Reduce Insurer Growth Prospects in Fed Exchange States
June 8, 2015 / 12:05 PM / 2 years ago

Fitch: ACA Subsidy Elimination Could Reduce Insurer Growth Prospects in Fed Exchange States

(The following statement was released by the rating agency) CHICAGO, June 08 (Fitch) Health insurers operating in states that are reliant on the federal health exchange may have reduced growth prospects if the Supreme Court decides to uphold King v. Burwell, as an elimination of some ACA subsidies may hurt enrollment, according to Fitch Ratings. The five largest states relying on the federal exchange are Florida, New Jersey, Ohio, Pennsylvania, and Texas. In these states, such a decision could also cause deterioration in the aggregate risk profile of consumers using the federal exchange, as healthy consumers who are no longer eligible for subsidies forego health insurance and acquiesce to ACA-imposed penalties. 'A Court decision that effectively eliminates ACA subsidies will have widespread implications for the health insurance industry, many of which are highly uncertain,' said Mark Rouck, Senior Director. 'The implications on individual health insurers will be disparate, depending largely on the states from which they derive their enrollment.' Fitch does not anticipate the Court's decision resulting in a meaningful number of insurance rating actions. If the court rules against the subsidies, Fitch believes that most health insurers would continue to be able to generate earnings and interest coverage that are supportive of current ratings. A decision upholding the subsidies would effectively result in business as usual for health insurers from a financial and operational perspective. Fitch estimates that in 2014, the year in which the ACA's insurance exchanges began enrolling consumers, enrollment in the 33 states reliant on the federal exchange grew 19.8% compared with the prior year. In contrast, from 2010 through 2013, enrollment in these 20 states grew at an average rate of 4.2%. Fitch's report identifies the three largest health insurers in federal exchange-reliant states that are most likely to be impacted by the potential elimination of ACA subsidies based on 2014 enrollment. Contact: Mark Rouck, CPA, CFA Senior Director +1-312-368-2085 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60603 Doug Pawlowski CFA Senior Director +1-312-368-2054 Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: alyssa.castelli@fitchratings.com; Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com; Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Supreme Court’s Pending ACA Subsidy Decision (Implications if Subsidies Voided) here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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