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What next for PPACA?

17 May 2017

The US is the largest market in the world for private medical insurance (PMI). This vast market is served by a broad range of providers including life and non-life (property and casualty/P&C) insurers and third party administrators (TPAs) including Blue Cross Blue Shield (BCBS) organisations, HMOs and self-insured health plans.

Total written premium has increased overall with the introduction of Patient Protection and Affordable Care Act (PPACA) of 2010, commonly known as the Affordable Care Act (ACA) or "Obamacare", in particular for HMOs and other non-insurance company providers, who have the largest share of the market.

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The individual market has been extended under PPACA, through the availability of subsidies, with the aim of making care affordable; however, the cost of PPACA exchange programmes are estimated to have increased by 10% in 2016: in some cases 25% to 35% increases in premiums have been reported in some states. Price hikes have arisen in some states due to undercharging in the first few years. In addition, individuals with plans taken out before PPACA, which had lower rates as the individuals were healthy, have been able to continue to renew them rather than join new risk pools.

What will happen to PPACA during Donald Trump's presidency is the question on everyone's lips. Health care was one of the primary reasons that voters elected Trump in the 2016 election. Many Trump voters expressed frustration with high premiums and the penalty tax of Obamacare and were swung in favour of the Republicans by their rhetoric of "repeal and replace". 

Reformation of healthcare, however has proven a difficult task, or as Trump stated, "Nobody knew that health care could be so complicated." At the beginning of March 2017, the Republicans issued a bill, the American Health Care Act H.R. 1628 (AHCA), to repeal and replace the PPACA, only to see the speaker of the House of Representatives withdraw the bill due to lack of votes to pass it on March 24th . Coupled with no Democrat support for the bill, several factions within the Republican Party were also opposed. A spokesperson for the Republicans has subsequently said that they will continue with their efforts towards repealing and replacing the ACA.

Another topic of current concern to the US market is the increased regulatory stance on mergers and acquisitions especially in relation to the lauded super-mergers. In February 2017, the merger deal between Aetna and Humana was called off, following a ruling by a federal court that the merger would weaken competition in the market. A federal court also ruled against the merger between Cigna and Anthem, although this ruling is under appeal. Cigna is seeking damages against Anthem for termination of the merger. 

There has been some growth in interest of ownership of US companies by Chinese investors. In October 2016 it was announced that China Oceanwide Holdings Group Co. Ltd had struck a deal to acquire control of Genworth Financial, Inc and there have also been discussions between Anbang Insurance Group of China attempting to buy U.S. annuities and life insurer Fidelity & Guaranty Life, but the acquisition is currently facing regulatory scrutiny. 

One estimate of the level of foreign ownership of the life insurance industry is 11.3%. In particular, involvement of companies controlled by Canada, Switzerland, Bermuda, the Netherlands, France, Germany and UK are noted. 

For further information please refer to the life insurance market report of the United States or contact your Axco Representative.