Will Hillary Clinton's Proposals Hurt Health Insurers?

After striking pharmaceuticals companies, with her "price gouging" tweet, the Democratic presidential hopeful Hillary Clinton has turned her attention toward the health insurance space. Now, she's about to give a long, hard look at the proposed mergers of Anthem Inc. ANTM - Cigna Corp. CI and Aetna Inc. AET - Humana Inc. HUM .

The mergers, which will reduce the number of players in the industry to three from five, have faced much ire recently. It is being apprehended that the deals will concentrate market power on the hands of a few players, leading to increased premium and lower benefits.

Hillary Clinton's firm stance on health insurers is evident from her comment that she will "be vigilant to prevent consolidation that harms consumers."

The presidential nominee also plans to further refine the health insurance reforms popularly called Obamacare. Her priority would be to "crackdown on insurers to limit out-of-pocket costs." These costs include all expenses like deductibles, coinsurance and copayments for covered services among others that aren't reimbursed by insurance.

Also on Hillary Clinton's agenda is giving more power to lawmakers to reject undue rate hikes by health insurers. Under the current heath care reform, this authority is in the hands of only certain select states.

But that's not where Hillary Clinton has drawn her line. She is pitching for three sick visits per year in insurance plans before deductibles kick in. In her campaign, Clinton pointed to a recent Kaiser Family Foundation study that average deductible for an individual has increased seven times faster than a worker's average wage since 2010.

High deductible is barring some people to visit a doctor because they cannot pay the first few thousand dollars of the bill before insurance kicks in. Having a deductible so high that one cannot afford to go to a physician is akin to not having insurance.

Deductible is part of the medical bill which must be cleared before patients can use their insurance coverage. But thanks to a high deductible, doctor visits are being barred by some thousands of dollars that must be shelled out before patients can avail of insurance.

It is ironic that health plans with high deductibles are the being sold widely on health insurance exchanges in the United States. High-deductible plans have proliferated among employers, and in 2014 they made up 85% of all plans sold on the Affordable Care Act's health insurance exchanges. Employers and insurers have turned to the plans to lower premiums, and shift more out-of-pocket costs to consumers. These plans also cost less than a plan with low deductible.

The health insurance lobby immediately snapped back. In their defense, the health insurers reminded Hillary Clinton that they are already subject to restriction on premium rise and have capped out-of-pocket costs. Moreover, the lobby said that the insurers are also facing increased costs in the form of industry taxes.

Now, the lobbyists are true to some extent since Obamacare also includes a cap on deductibles and other out-of-coverage payments. But these caps don't apply to all plans; and at $6,600 a year for a single coverage ($13,200 for family plans), the caps are too high to make any meaningful difference to most people.

Investors should note here that shares of insurers UnitedHealth Group Inc. UNH , Anthem Inc. and Aetna Inc. remained unaffected by Clinton's proposals. But if what she wants comes into effect, insurers will have to once again rework their business practices, when they've just about settled down with Obamacare.

Zacks Rank

UnitedHealth, Aetna, Cigna all carry a Zacks Rank #2 (Buy), Anthem carries a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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