One well-publicized tactic insurers have used to reduce costs in the Obamacare public exchanges is "network narrowing," by which insurers contract with fewer health care providers for health plans. However, a new draft letter from the Centers for Medicare & Medicaid Services (CMS) indicates that the government will crack down on this practice in 2015. Insurers will be required to include 30% of essential community providers (or ECPs) in their network, thereby establishing a floor for consumers looking for choice in doctors and hospitals.
While this may be good news for consumers from a choice standpoint, insurers will have to find other areas of potential cost savings or raise premiums. And this has been a low-margin business thus far, with insurers generally predicting either a narrow loss or a narrow profit. Some have threatened to substantially raise premiums in 2015, with Aetna's (NYSE:AET) CEO, Mark Bertolini, claiming that insurance rates in some markets could double next year.
With 2014 open enrollment in the exchanges about to end, and premium rates for 2015 soon to be released, what will this news mean for insurers, investors, and consumers? Will insurers make money on the public exchanges and participate again in 2015? And how will this affect your investments? Check in below, where Motley Fool health care analysts David Williamson and Michael Douglass consider the state of play with eight days left in Obamacare open enrollment.
David Williamson owns shares of UnitedHealth Group. Michael Douglass has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.