Insurance company pays $100M for no-cost commercial paper
Insurers are paying big bucks for no cost commercial paper for insurers and small businesses.
The industry has been under a pressure to pay for paper to keep costs low as demand from the ACA and other health reforms has driven up demand.
In January, the first of three big insurers to pay was UnitedHealth Group, which paid $1.4 million for a contract to cover a business with a $100 million annual turnover.
Other insurers have also paid big bucks, including Cigna, which has paid $2.7 million for its no-bid contract for a commercial paper supply business.
The company has been in the process of moving to a non-profit model and is not expected to close its paper printing operation.
Other insurance companies are likely to follow suit.
“The market is a competitive one, so we are always trying to find ways to grow the business,” said Gary Smith, senior vice president at IHS.
The financial pressure to keep prices low for insurers is expected to continue into next year.
But it’s likely to increase as insurers seek to lower costs and as regulators, especially the Consumer Financial Protection Bureau, review the industry’s practices.
“There’s no question that the industry has become a little more conservative, and that means less flexibility for insurers to offer the best deal,” Smith said.
Insurers have struggled to sell their products to smaller companies, but they are still willing to pay large sums for the privilege of having coverage.
The cost of no-hassle commercial paper is about $2 per roll of paper, compared with $6 for a regular business paper.
It can cost more to purchase insurance through an employer plan or an individual plan.
The new rules for commercial paper companies were announced earlier this month by the Federal Trade Commission and the Federal Insurance Office, which are tasked with cracking down on deceptive advertising, fraudulent claims and false claims.
The commission has said it will investigate the costs of the commercial paper contracts as part of its ongoing investigation into whether insurers misrepresented the costs for policies purchased through an exchange.
The consumer protections agency has been investigating insurance companies since 2016 after a series of lawsuits and a class action lawsuit.
The FTC has been trying to hold companies like UnitedHealth to account for claims that were exaggerated or false.
The agency has also been looking at whether insurance companies misrepresented that the new no-profit status offered by the exchanges could be used for health care.
The federal government and some insurers have been trying for years to limit the health insurance industry’s ability to pay medical bills.
Under the ACA, insurers must make health care claims as part the cost of an insurance policy.
Under new rules, they cannot charge a higher claim for coverage that has no cost.
The rules also require insurers to tell consumers about cost-sharing subsidies, known as cost-shifting, that are typically used by some small businesses to help offset the higher health care costs of large employers.