Spring 2015 News & Analysis
Health Insurance Reform
On March 4, 2015, the United States Supreme Court will hear oral arguments in the consolidated appeal in King v. Burwell. This is one of the many legal cases brought over the past five years challenging the constitutionality and legality of various aspects of the Affordable Care Act. The Supreme Court upheld the constitutionality of the individual coverage mandate in a prior ruling in 2012. The King case attacks the mandate from an entirely different perspective, arguing that express language in the ACA limits the availability of premium tax credits to health policies purchased exclusively through on-line markets established by the states, rather than Healthcare.gov, the federal government’s health care exchange. If this interpretation prevails, 87% of the six and one half million consumers who purchase subsidized coverage through the federal exchange will likely be unable to afford those premiums without the tax credits. This will allow them to claim an unaffordability exemption from the individual mandate, and the individual and small group health insurance markets will be significantly affected. Republican leadership in Congress has announced that a decision against the availability of tax credits in the primary marketplace will be leveraged to replace the Affordable Care Act with a Republican solution to unaffordable and inaccessible health care for middle class Americans.
According to the Department of Health and Human Services in 2015, 87% of individuals enrolling in individual and small group health policies through Healthcare. gov, the website established by the federal government to offer subsidized product in 34 of the 50 states, qualify for advance premium tax credits. Six and one half million individuals have enrolled through this site for coverage in 2015, and premium assistance on average covers about 72% of their monthly premiums , or about $268 per month.
Cyber Security Risk
On February 4, 2015, Anthem, one of the largest publicly traded health insurers in America, suffered a cyber- security incident in which 80,000,000 current and former enrollees’ data was hacked. The hackers obtained access to enrollee names, birthdates, social security numbers, addresses and employment data. Several class actions have been filed by current and former insureds, seeking damages related to the inadequacy of Anthem’s security practices. A Congressional inquiry has been initiated by the Senate HELP Committee, seeking information regarding the security of health information technology generally and the preparedness of the health industry for cyber threats. Anthem has responded with the standard offer of two years of free credit monitoring and identity theft protection services for those affected by the breach.
Predictive Modeling within the Insurance Industry
A recently released study conducted by consultant Towers Watson noted that property and casualty insurers are increasingly moving towards predictive modeling for risk selection, rating and product pricing. Given the perceived value and link to greater profitability, Towers Watson suggests that the models are likely to be extended to evaluation of the potential for fraud or litigation or for the purpose of establishing targeted product marketing. Despite widespread adoption and the perception of value added by application of the modeling techniques, only about two thirds of all U.S. and Canadian insurers surveyed incorporate predictive modeling in their business operations. For those that are not so data driven, they claim that access to data and data warehousing constrain their ability to adopt this form of analysis that enhances rate accuracy, loss ratios and profitability.