Insurers' Rating Outlooks Take Tumble Because of Health Reform

Joseph Paduda, principal at Health Strategy Associates, LLC, says Fitch's analysis makes sense if a public plan option forces providers to accept Medicare or similar rates, but he doesn't think that is going to happen. "There is zero chance of any reform measure passing that includes a public plan reimbursing at Medicare," he says.

Paduda also questions Fitch's suggestion that there are risks associated with potential adverse selection and insurance price-fixing. He adds there is no chance of the government mandating premium levels and adverse selection could actually help private insurers, who may want to drop sick members into a public plan "if the legislation isn't carefully written."

Paduda acknowledges that the health insurance industry is at risk, but also thinks there are opportunities for private insurers. Smart health insurers will see health reform as a chance to gain millions of new members and slash administration expenses by eliminating underwriting, refining marketing, and investing in population health, he says.

"I'd note that Fitch now has all plans in 'negative' status; I believe that is misguided, as there are clearly several that are better positioned to take advantage of reform if that happens," says Paduda.

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