Success in today’s health insurance industry may be elusive because of significant market trends driven by the Affordable Care Act, (ACA), according to William Lindsay III, president of the Lockton Employee Benefits Group. He notes that some segments of the industry can be expected to fare better than others, and success will vary by geographic region and market segment.
Contrary to popular opinion, Lindsey predicts that commercial insurance plans overall could do well under the ACA as a result of increased demand for coverage. While new regulations will reduce the margins realized by insurers from increased enrollment, there are opportunities to reclaim those margins through new populations. According to a recent report by Milliman, a healthcare consulting company, high-risk or high-utilizer populations – including newborns, adult females, and the elderly – can actually be as profitable for plans as other beneficiaries. An important factor to ensuring profitability is quickly identifying high-demand members and engaging them in intervention programs, notes the report.
The ACA employer mandate, which will apply to businesses in 2015 with 100 or more employees and those in 2016 with 50-99 employees, is intended to help spur development of employer-sponsored health plans – particularly among small to medium-sized businesses. In this climate, administrative-services-only providers will need to innovate because the approach used by large employers will not fit the small employer market expansion, says Lindsey.
Some employers may decide to eliminate their employee insurance plan contributions and instead pay the $2,000 to $3,000 per employee penalties imposed under the ACA, says Lindsey. A recent report by the financial industry research firm S&P Capital IQ, part of McGraw Hill Financial, suggests that by 2020, about 90% percent of American workers who receive health insurance through their employers will be shifted to government exchanges.