Moody’s: ‘Smoke and Mirrors’ for ACA Enrollment Deadline Negative for Insurers

The latest enrollment extension under the Affordable Care Act may be a positive for consumers, but the move leaves more uncertainty for the insurance industry. On Monday, the original enrollment deadline for the ACA, ratings agency Moody’s released its outlook on the latest extension, deeming it “credit negative” for insurers.

The extension was confirmed last Wednesday by the Department of Health and Human Services, and an HHS spokeswoman told FOXBusiness.com that they have not announced a deadline for the extension. Those who claim an extension will have to “attest” to prove that their claims are truthful, she says, but it is unclear when and how this will unfold.

“It will depend on how long it takes to cycle through the people who are in the queue.  Could be a few days, a week,” the spokeswoman said. “We encourage people to finish the process as soon as possible. We have not announced a date.”

Moody’s says this open-ended scenario creates more instability for the industry.

“Any extension of the open enrollment period exposes insurers to anti-selection. In essence, individuals who had decided to forgo insurance but now find themselves in need of medical care have been given an additional opportunity to enroll,” the reports states. “Since these extensions were not previously contemplated by insurers, it is unlikely that insurers factored them into their premium rates. As a result, we expect that the losses insurers were projecting for this block of business will be greater than they anticipated.”

ObamaCare mandates that every individual in the country have insurance by the end of open enrollment period, on Monday, or face a fine of $95 a year or 1% of their annual income for failing to comply.

Moody’s became the first ratings agency to downgrade the health insurance industry outlook for the year in January due to continued uncertainty under the ACA. In March Moody’s then reported the administrative fix, which allows people with once-cancelled health insurance plans to keep them through March through 2016, was also negative for the industry.

Steve Zaharuk, senior vice president at Moody’s, says the industry is just faced with too many unknowns. “The insurance industry wants affordability of products and they want to make them profitable. The riskier this whole thing looks challenges the affordability for people.”

Analysts predict premiums will continue to increase as the ACA continues its implementation due to the way the law is written, Zaharuk says.

“When you think about the ACA and what it meant for insurers from the 30,000-foot level, it looked great for insurance companies because everyone was buying products,” he says. “But they gave up a lot of the tools they had—their underwriting tools, guaranteed issue—basically we have a situation that is constantly changing, and a lot of what they had been anticipating is now negative for them.”

Moody’s would have to see more stability before considering any outlook changes, he says.

“Through all the smoke and mirrors, open enrollment looks to be extended forever. You don’t want a situation where people can just buy health insurance as they need it.”