Despite Congress' ACA repeal push, individual market insurers had a strong Q1

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Individual market insurers' premiums per enrollee grew 20% from the first quarter of 2016 to the first quarter of 2017, while per-person claims grew only 5%. (Getty/BeeBright)

A new analysis of insurers' first-quarter results showed that their financial performance in the individual marketplaces is continuing to improve—though policy uncertainty threatens that progress.

The Kaiser Family Foundation analysis builds upon a similar analysis that it released in April, which found that after struggling in 2014 and 2015, insurers’ individual market performance was on the upswing in 2016.

That trend was even more pronounced in the first quarter of 2017, the newer analysis shows, based on two primary metrics: medical loss ratios and gross margins per member per month.

Insurers’ loss ratios first started to decline in 2016, and they showed “significant improvement” in 2017, averaging 75% compared to a high of 88% in the first quarter of 2015. Though the report noted that annual loss ratios are likely to end up higher than 75%, the fact that they’ve gone as low as they have is still a sign that insurers are moving toward profitability.

Similarly, gross margins improved “dramatically” in the first quarter of this year, jumping up to $99 per enrollee after hitting a low of $36 in the first quarter of 2015. This metric, too, will likely be lower for the whole year, but like improving loss ratios, it is still a positive sign for insurers.

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As for what is driving the recent increased profitability for insurers, the report pointed to the fact that premiums per enrollee grew 20% from the first quarter of 2016 to the first quarter of 2017, while per-person claims grew only 5%. 

In addition, the average number of days individual market enrollees spent in a hospital in first quarter of 2017 was similar to first quarter inpatient days in the previous two years. That finding suggests the risk pool didn’t get significantly sicker—assuaging concerns that healthy enrollees would drop coverage in response to premium increases.

In sum, “insurer financial results show no sign of a market collapse,” the report said. However, policy uncertainty has the potential to counteract that trend—and indeed, has led some insurers to exit certain coverage areas next year and request major premium increases.