NEW YORK--(BUSINESS WIRE)--Health insurance exchange (HIE) pricing for investor-owned hospitals is
beginning to form, according to Fitch Ratings. Although final details
regarding the structure and pricing of the commercial insurance products
to be offered in the HIEs have not been cemented, increased clarity is
expected during the next few months. HIEs are designed to be structured
online marketplaces purposed for the sale and purchase of health
insurance by individuals. The HIEs, mandated by the Affordable Care Act
(ACA), are expected to be functional by Oct. 1, 2013, so that
individuals can purchase coverage, effective Jan. 1, 2014.
From the perspective of hospitals, patients with commercial health
insurance are typically more profitable than those with
government-sponsored coverage, including Medicare and Medicaid. So the
expansion of the number of individuals with commercial insurance under
the ACA has positive implications for the industry in general.
Along with the expansion of state Medicaid programs, the structure and
pricing of the products in the HIEs is one of the most important
variables that will determine the financial impact of the ACA on
hospitals. The structure of the insurance products offered in the HIEs,
including benefit packages, contract terms, and payment rates to
providers, are particularly important. These factors will be highly
influential in the ultimate boost to revenues and EBITDA that
investor-owned hospital companies realize under the insurance-expansion
mandate of the ACA.
Hospitals are likely to have to accept lower payment rates than current
commercial rates for the HIE plans as insurers are incentivized to keep
premiums as low as possible in order to offer competitive products in
the HIEs. In some markets, lower rates on HIE products may be offset
through higher patient volumes as hospitals could accept discounted
pricing to secure inclusion in narrow provider networks.
Looking ahead, we believe the products offered in the HIEs will vary by
market, much like the current commercial health insurance market. In
addition to narrow networks, there may be opportunities for hospitals to
engage in greater financial risk sharing, such as through bundled
Additional information is available on www.fitchratings.com.
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