“One of the big ironies of the health care debate was that supporters of the new law were arguing that government intervention was necessary to deal with the problem of consolidation in the insurance industry. ObamaCare was supposed to change all of that by fostering competition. But now we’re starting to get confirmation of one of the arguments that critics of the legislation were making — that ObamaCare’s onerous regulations would drive smaller insurers out of business, thus leading to further consolidation in the industry.”
“Principal said its exit in part is because smaller insurers will have a hard time competing with bigger players under the overhaul. Expenses such as for sales forces are a bigger proportion of costs for smaller insurers, said Mr. Houston, making it harder to meet the new threshold on how much they pay out for care, known as the medical-loss ratio. ‘In the past, scale hasn’t mattered,’ said Mr. Houston. ‘But with administrative costs getting the focus,’ the company would have to grow significantly to stay in the business.”
“The Principal Financial Group announced on Thursday that it planned to stop selling health insurance, another sign of upheaval emerging among insurers as the new federal health law starts to take effect… Principal’s decision closely tracks moves by other insurers that have indicated in recent weeks that they plan to drop out of certain segments of the market, like the business of selling child-only policies. State regulators say some insurance companies are already threatening to leave particular markets because of the new law.”