A look at how health reform changed the game for insurers in 2014

The commercial health insurance market was tumultuous in 2014 thanks to a slew of changes brought on by the Affordable Care Act--all of which is reflected in payers' bottom lines in that pivotal year, according to a research report from actuarial firm Milliman.

The report examines insurers' financial results in the group and individual markets, enrollment changes in the individual market, as well as the impact of the ACA's risk adjustment and risk corridor programs. Some of its key findings include:

  • In the individual, small-group and large-group markets, national composite underwriting results deteriorated in 2014. In the individual market, underwriting results were significantly impacted by the shortfall in risk corridor payouts, which hit new market entrants especially hard. Yet individual market underwriting results also varied considerably by state--some, like California, experienced a gain.
  • Risk adjustment transfer payments for 2014 represented about 3.6 percent of earned premium for insurers in the individual market and 0.9 percent of earned premium for those in the small group markets. In the future, Milliman expects risk adjustment transfers to "become more impactful" to insurers in these markets. Federal officials are also considering changes to the risk adjustment methodology to account for plan differences, FierceHealthPayer has reported.
  • Overall enrollment in the commercial market decreased in 2014 by about 1.5 percent--in part because of an accelerated enrollment drop in the fully insured group markets as more insurers moved business to self-funded platforms. But enrollment in the individual market jumped nearly 40 percent, from 10.9 million to 15 million covered lives.
  • Insurers that had dominant market share in the individual markets in 2013 were generally able to maintain or increase it, while some new entrants and insurers with a small amount of market share were able to capture significantly more. The latter effect, the report says, is probably a result of individual marketplace consumers' price sensitivity.

In the near term, Milliman expects "continued volatility" in the individual market as insurers enter and exit. Some of the leaders of the country's largest insurers, however, have said they anticipate the ACA marketplaces to eventually stabilize.

To learn more:
- read the report (.pdf)

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