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Bad News for Obamacare Insurers: Will Premiums Spike in 2015?

By Michael Douglass and Dave Williamson - Mar 23, 2014 at 11:00AM

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Bad news for insurers in a new CMS draft letter. What's next?

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 ( 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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

UnitedHealth Group Incorporated Stock Quote
UnitedHealth Group Incorporated
UNH
$444.22 (-1.72%) $-7.78
Humana Inc. Stock Quote
Humana Inc.
HUM
$419.71 (-1.95%) $-8.36
Cigna Corporation Stock Quote
Cigna Corporation
CI
Aetna Inc. Stock Quote
Aetna Inc.
AET

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