Dive Brief:
- A new analysis by McKinsey & Co. found insurers' losses on Affordable Care Act individal plans significantly worsened during 2015, the marketplaces' second year of operation.
- Based on insurers’ filings with state regulators, the report found the industry’s cumulative margin on individual plans in 2015 was between -9% and -11%, The Wall Street Journal reported, which is about twice the -4.8% margin McKinsey calculated for 2014.
- Just about one-fourth of participating insurers profited on individual ACA plans for 2015--typically those using narrow networks or HMO type formats to tighly control enrollees' healthcare, McKinsey stated.
Dive Insight:
The report noted individual market is still in flux and had an aggregate loss of $2.7 billion in 2014, yet performance was highly varied between states and carriers. Although early 2015 results indicate continued variability, some carriers may have been profitable and there is little risk of a market-wide "death spiral" due to subsidies.
However, the increasingly steep losses are contributing to insurers such as UnitedHealth and Humana leaving more markets, a trend expected to leave a few states and some counties around the U.S. with only one carrier for 2017.
McKinsey noted the 2015 analysis is incomplete because filings were only available for 86% of insurers and because it doesn't factor in the final impact of federal risk protection programs. It suggested the increased losses were due to healthcare costs and the scaling-back of the federal reinsurance program.
The findings appear to mesh with insurers' experiences in the marketplaces, some of which are currently too undesirable to keep more than one carrier. Alaska, Alabama, and Wyoming are expected to only have one carrier offering ACA plans in 2017, Vox reported, and some other states have counties that will offer just one plan. In total, about 650 counties are expected to have only one option in 2017 compared to 225 in 2016.
Vox highlighted that the federal government has no contingency plan or recourse to follow if any states see all their carriers drop out, leaving an empty marketplace. However, Vox's Sarajh Kliff noted some health plan would be likely to step in to secure an opportunity for a monopoly where it could set rates high enough to make a worthwhile profit -- though a lack of competition remains less than ideal for consumers.