Report: ACA business unprofitable for most health insurers

Though it still represents just a small portion of the privately insured marketplace, Affordable Care Act exchange business was unprofitable for most health insurers in 2014 and will likely be in 2015, according to a new report from Standard & Poor's.

The impact of challenges on the ACA exchanges on health plans' creditworthiness will "remain limited in the near term," the report says. In addition, the effect an insurer's ACA business has on its overall operating performance largely depends upon the proportion of that business in an insurer's total book, S&P credit analyst Neal Freedman notes in the report.

"This explains the ACA's much smaller overall impact on the operating performance of large, national players (Aetna, United, Cigna and others) than on single-region Blue plans," he writes.

While most insurers are equipped to withstand moderate strain due to challenges in the individual market, if the trends continue and it appears a plan's losses will persist for multiple years, S&P could lower the plan's ratings, the report says.

To respond to the challenges of operating on the ACA exchanges, many insurers have stopped offering plans with broad provider networks as well as platinum and gold-level plans that have experienced severe adverse selection, according to the report. They also seek to enhance their medical management capabilities and administrative efficiency.

Finally, nearly all insurers have chosen not to include estimated risk corridor payments in their 2016 pricing assumptions, the report notes. The federal government was only able to pay out 12.6 percent of what it owed insurers through the risk corridor program for 2014, and a previous S&P report predicted the shortfall would continue at least for 2015.

The S&P report also addresses UnitedHealth's recent announcement that financial losses on the ACA exchanges may cause it to leave the marketplace in 2017. While at first glance this could call into question the viability of the exchanges, the report points out that the announcement could be "political posturing" on the part of UnitedHealth to influence the ongoing ACA debate. In addition, legislative and regulatory actions could remedy some of the insurer's complaints, such as the high costs associated with consumers who move in and out of the ACA exchanges.

To learn more:
- here's the report

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