The Supreme Court opinion upholding current tax subsidies under the Affordable Care Act (ACA) will not have any impact on rated U.S. not-for-profit and for-profit health insurance firms because it continues the current operating environment, according to a rating agency.
The June 25 ruling is “a positive for the U.S. health insurance industry, especially for insurers that have invested heavily to compete on the insurance exchanges,” Standard & Poor’s Ratings Services said in a statement. “This will help resolve an uncertainty that has been a pain point not just for insurers, but for the ACA as a whole.”
S&P’s Ratings Services added that the subsidized exchange business benefits U.S. healthcare providers.
The Supreme Court in King v. Burwell, validated the legality of federal subsidies under the ACA in states where the state did not set up its own insurance exchange, but rather relied on the federal exchange.
The loss of the subsidies could have jeopardized the affordability of coverage for as many as 6.4 million lower-income Americans in 34 states who purchase private health insurance through the federally run exchanges, according to the Centers for Medicare and Medicaid Services.
“While some of the conditions that gave rise to the ACA in the first place – medical costs that are too expensive; dwindling levels of employer sponsored care; huge number of underinsured/uninsured with limited access points – still burden the healthcare delivery system and remain potent concerns for the United States, the ACA and the insurance exchanges are helping to alleviate some of these concerns,” S&P said.
As the ruling is an affirmation of the status quo, S&P does not expect it to have any credit implications for the state sector.
S&P said the ruling reduces ACA’s uncertainty, which is good for the industry. “Uncertainly is generally bad for credit, and makes it harder for insurers to price appropriately. The resolution of this issue does somewhat reduce the previously elevated industry risk and also puts the ACA on a stronger footing,” S&P said.
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