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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.
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
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
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
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