Stephen Hemsley, of United Group Inc. - warned that he and his peers may not
participate in the Federal run online Health Exchanges, where customers and
small businesses could shop for policies next year.
"We will only
participate in exchanges that we assess to be fair, commercially sustainable
and provide a reasonable return on the capital they will require," CEO Stephen
If insurers do not
participate in Obamacare, consumers will find it difficult to buy affordable
options, with a limited choice and higher prices. Taxpayers could be hit hard
as higher premiums will need more public spending on subsidies.
For insurers to
participate in the federal exchanges, they have to adhere to the costly rules
by the government and also go by the varying standards of different states -
plus meet the restrictions on pricing the products. They will also be liable to
pay a fee to sell insurance on the exchanges which may be 3.5% at a minimum
from each customer's premium and increase from there on.
will need to establish a local network provider in the states where they
participate. Their profit margins will be low and according to The Wall Street
Journal - insurers expected a 3-5 % profit at least.
Sheryl Skolnick, an insurance analyst for CRT
Capital Group, told the Associated Press, "There is a significant risk . . .
that if the economics on the exchanges are not favorable, they're simply not
going to participate."
Unitedhealth Group may participate in 10 -25
exchanges, while the Aetna group may join 15 of the 100 exchanges
approximately. The feasibility of the exchanges depends on the government
subsidies given to insurance covers.
In the future- with the rising costs, the Congress may
not want to or be able to afford to subsidize the exchanges so as to ensure
participation by both consumers and insurers.
line is if insurers choose not to participate in Obamacre's exchanges, the
federal government will lose control of their health reform effort. Consumers
will end up paying higher costs.
Hannah Punitha (IRDA Licence Number: 2710062)
Sally Piper. 18th