Insurers offering individual market plans saw their best financial performance under the Affordable Care Act in 2018, according to a new study.
The Kaiser Family Foundation (KFF) compared payer performance on the exchanges from between 2011 and 2018 and found that individual member per month margins reached $166.82 in 2018, up from $78.52 the previous year.
That’s a marked increase from the 2015 low point, where insurers posted a $9.21 loss per member per month, according to the study.
Medical loss ratios were also at their lowest (70%) in 2018, and peaked in 2015 at 103%. Under the ACA, exchange plans are expected to meet an 80% medical loss ratio, so the study estimates payers will issue $800 million in rebates to members to make up the difference.
“While markets in some parts of the country remain more fragile, the individual market on average is becoming more profitable,” the researchers said. “Some insurers have exited the market in recent years, but others have been successful and expanded their footprints, as would be expected in a competitive marketplace.”
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Major insurers such as Aetna and Humana scaled back their ACA offerings significantly or exited the markets entirely in the wake of financial instability. But in 2019, some additional insurers entered the market, and others such as Centene even expanded their footprints.
The newfound profitability in the marketplaces is also in the face of policy changes that spooked payers, such as the Trump administration’s decision to end cost-sharing reduction (CSR) payments in late 2017.
The KFF report also comes as enrollment in ACA plans has declined in the past few years. The financial results suggest, however, that the markets are “stable and sustainable” despite this.
The study also compares premium fluctuations and found that premiums increased significantly in 2017 and 2018 as a result of policy changes, including the end of CSRs.
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However, some insurers may have overcorrected in accounting for the loss of those payments, leading to lower premium hikes for 2019, according to the study.
“Low loss ratios and higher margins indicate that some insurers raised premiums more than was necessary to cover claims and administrative costs and earn a reasonable profit in 2018,” the researchers said.
For 2017, the premium increases were tied to a needed market correction to adjust for the marketplaces’ risk pool, the researchers said.
The ACA’s risk pool is sicker than the individual market was prior to the law, as people with pre-existing conditions are guaranteed coverage in these plans.