July 12th, 2010

Initial Reactions to Health Care Reform: An Insurer and Reinsurer Perspective: Part I, Introduction

Posted at 1:00 AM ET

rains_david_141pxDavid Rains, FSA, MAAA, Managing Director and Head of Life, Accident & Health Specialty and Ryan Keith, Assistant Vice President
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With the passing of the Patient Protection and Affordable Care Act, the environment for health insurers has drastically changed. Undoubtedly, the wheels of progress move slowly and we have only begun to understand the full impact that the reforms will have on our industry. What we do know is that these changes will have a significant and immediate impact on every organization conducting business in the health care arena.

In order to assess the current situation, brokers throughout Guy Carpenter & Company, LLC reached out to our business partners in all segments of the health care industry. We spoke with executives from fully insured and stop loss providers, large, individual and small group insurers, Medicare and Medicaid programs, as well as high risk health pools and commercial plans. The insurers that we spoke with ranged from small, single-state carriers to large national insurers. To enhance the scope of our survey, we also contacted reinsurers who are active in this market. Not only do reinsurers provide essential resources that may help insurers manage their increased exposure as a result of health care reform, but they also provide tremendous insight into what their clients are seeing in the market.

In total, Guy Carpenter spoke with 24 various organizations about the immediate and long term effects of health care reform. There were two general themes that persisted throughout these conversations. The first theme was that insurers are still navigating their way through the legislation. The second theme was that growth opportunities do exist and in order to survive in the new post-reform world, insurers must be able to identify and capitalize on these opportunities.

The overwhelming consensus is that insurers and reinsurers alike have yet to fully identify how health care reform will impact their organizations. This is a significant point to make; the reform is complex and multi-faceted so health insurers are taking their time in determining how to adapt to the new environment. If anything is learned from the Guy Carpenter survey it should be that the majority of health insurers have yet to develop their strategic plan for health care reform implementation.

Although most executives are still trying to understand the full impact of health care reform, it is important to note that many of the changes must be implemented by September 23, 2010. Therefore, while most insurers have yet to make final decisions about how they will adapt to health care reform, we would expect these initial decisions to be made within the coming months.

Another key conclusion from our survey is that health care reform does bring additional opportunities to health insurers as well as the obvious challenges. From the expansion of Medicaid to patient outcome requirements and mandatory coverage requirements, health care reform has created opportunities for membership growth and improvements in medical management. Insurers understand that capitalizing on these opportunities is one of the main keys to long term success.

In addition to the themes addressed above, several other specific aspects of health care reform were on the top of most executives’ minds. Based on the feedback received, this paper identifies the following seven aspects of health care reform that our business partners identified as having the biggest impact on their organization:

  • Mandatory Coverage for dependents up to 26 years of age
  • Removal of lifetime maximum limits
  • Minimum loss ratio requirements
  • Expansion of Medicaid
  • Mandatory coverage requirements for all
  • Pre-existing condition exclusions
  • Reduction in Medicare reimbursement rates

This briefing was prepared by members of Guy Carpenter’s Life, Accident & Health team. Questions regarding this briefing may be directed to your Guy Carpenter reinsurance broker or any of the group members, listed below.

Ryan Keith                                                         206-621-2941
David Rains                                                       215-864-3786
Richard Foster                                                   206-621-2478
Jim Grant                                                           603-899-1280
Matt Smith                                                         206-621-2993
Miranda Shriver                                                  952-820-1010
Phillip Barker                                                      206-621-2997
Cyndi Zhang                                                      206-621-2979
John Cox                                                            206-621-2972
Wesley Magee                                                   206-621-2946

Guy Carpenter & Company, LLC provides this report for general information only. The information contained herein is based on sources we believe reliable, but we do not guarantee its accuracy, and it should be understood to be general insurance/reinsurance information only. Guy Carpenter & Company, LLC makes no representations or warranties, express or implied. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Please consult your insurance/ reinsurance advisors with respect to individual coverage issues.

Readers are cautioned not to place undue reliance on any historical, current or forward-looking statements. Guy Carpenter & Company, LLC undertakes no obligation to update or revise publicly any historical, current or forward-looking statements, whether as a result of new information, research, future events or otherwise.

Statements concerning tax, accounting, legal or regulatory matters should be understood to be general observations based solely on our experience as reinsurance brokers and risk consultants, and may not be relied upon as tax, accounting, legal or regulatory advice, which we are not authorized to provide. All such matters should be reviewed with your own qualified advisors in these areas.

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