Health insurers that struggled to make a profit in the individual market in 2014 found little relief in 2015, according to a new analysis from consulting firm McKinsey & Co.
It calculates that insurers' aggregate post-tax margin in the on- and off-exchange individual market was down 4.8 percent in 2014, which amounts to a $2.7 billion loss nationwide. In 2015, McKinsey estimates that aggregate losses in the individual market may have more than doubled, with post-tax margins down between 9 percent and 12 percent.
Higher medical loss ratios and lower reinsurance payments are the two major contributing factors to those climbing losses, according to McKinsey. Close to one quarter of plans reported positive margins in 2015, though the analysis notes that there is some turnover between 2014 and 2015 in terms of which carriers generated a positive margin.
In both years, though, financial performance varied widely among states and carriers. For example, in six states more than 75 percent of carriers had positive individual market margins in 2014.
Carrier-specific factors, including carrier type, benefit design and network breadth, also influenced performance, the analysis says. Plans based on HMOs had lower losses than those based on PPOs, and plans with narrow networks had better aggregate margins and lower median premium increases than their broad-network counterparts.
Consumer operated and oriented plans were the most unprofitable in the individual market in 2014, while Kaiser Permanente was the most profitable carrier.
Even with some carriers' struggle to make a profit, the individual market has little chance of entering a "death spiral" given that the federal government provides subsidies to lower-income enrollees, the report says.
Because the individual market is unique from a regulatory standpoint, the ongoing subsidies payments--rather than risk and cost of care--is the primary determinant of the market's stability.
Those subsidies are in jeopardy, however, if a recent ruling by a U.S. District Court Judge stands, as it strikes down the ACA's cost-sharing reductions that are paid to insurers on behalf of enrollees.
To learn more:
- here's the analysis
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