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Health Insurers Find Stable Footing in 2019

According to a recent report from S&P Global Ratings, 2019 should be a strong year for health insurers. The financial analyst firm predicts that the American health insurance market is likely to remain stable over the course of the year.

Conditions are generally favorable for those doing business in this sector at the moment. For one thing, the American job market has been growing. As more people get hired, more people opt into employer-sponsored health insurance. This, in turn, boosts the number of customers covered by insurance companies.

There’s also significant business available for insurers in the area of government-sponsored health coverage since private health insurance companies can participate in federal or state-based health insurance exchanges. S&P noted that these markets are seeing greater stability now than in the earlier years of the Affordable Care Act. According to some predictions, 2018 will be the highest year of earnings for marketplace insurers. One sign of the health of the exchanges is that new participants have been joining the marketplace’s insurer lineups in recent years.

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Operating managed Medicare or Medicaid plans is another way that many insurers choose to participate in the realm of government-sponsored healthcare. As Baby Boomers are turning 65, Medicare enrollment numbers are going up, and many of those enrollees are opting for Medicare Advantage plans. These private alternatives to traditional Medicare offer robust benefits without a robust price tag. Managed plans are also becoming a common trend among state Medicaid programs.

As a result of the favorable health insurance market, the majority of health insurers under S&P’s purview received a rating of “A” or better at the end of 2018. Despite the positive news, the analyst firm notes that there are some issues looming that could reduce the future stability of the market.

The continued viability of the ACA is one such concern. On the one hand, because Democrats gained control of the House of Representatives during the November 2018 midterm elections, the probability of a congressional ACA repeal seems unlikely to happen in the near future.

On the other hand, the Trump administration may continue to attempt changes to the ACA through other means. Furthermore, in light of a late 2018 ruling from a federal judge, the constitutionality of the healthcare law will once again end up before the Supreme Court.

Also of concern is the fact that healthcare costs around the country continue to rise. Climbing costs could affect insurers’ financial stability. And several mergers of large companies have led to the creation of even larger healthcare giants, which will impact the healthcare industry – for better or worse, it remains to be seen. Near the end of 2018, Cigna Corp. and Express Scripts finalized their deal, and Aetna and CVS Health did the same.

Involvement in government-sponsored healthcare can involve a good deal of red tape. While major healthcare companies often have the manpower and departments to handle this, smaller insurers may find themselves struggling to stay ahead. Federal and state exchanges have seen the entrance of many new insurers over the last few years, which has given consumers greater choice. It’s possible, though, that some of the smaller players, unable to keep up, will once again exit over the next few years.

It’s also possible, however, that the natural response to these company mergers may simply be that collaboration across healthcare entities increases. This could lead to greater efficiency and productivity.

In the short term, S&P analysts predict that payment-and-delivery reform will be a key focus for insurance companies this year. Attempting to follow through with the ACA’s provisions regarding value-based payments may be an additional source of increased collaboration between healthcare entities.

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