Dive Brief:
- Health insurers saw varying levels of profits on individual policies sold in 2014 during their first year participating in the ACA marketplaces, according to a new Commonwealth Fund report.
- Analyses of insurers’ financial performance data--some of which had been just recently released as required under the ACA--indicated that just one-third of the participating insurers remained or became profitable, while two-thirds were unprofitable.
- The researchers noted, meanwhile, that most of the insurers that lost money in the 2014 individual market had also failed to turn a profit the year before, prior to the implementation of the ACA.
Dive Insight:
The report concluded that reinsurance under the ACA was key in protecting insurers from excessive losses while they gained the necessary experience to understand how much their new marketplace enrollees would cost them. In the end, it suggested that although insurers' claims projections can be expected to continually get more accurate, policymakers should give them longer to adjust by extending the ACA's reinsurance provision past 2016, after which it is slated to phase out.
The study looked at CMS data on insurers’ profits from selling insurance, excluding other profits from investments. It included all of the 144 insurers that had a minimum of 1,000 individual-market enrollees, and that were active in 2013, and that sold primarily ACA-compliant policies in 2014.
It found that overall, medical claims for 2014 were 5.7% higher than insurers had projected, but that some were much farther off than others.
"The quartile of insurers with the highest claims (75th percentile) underestimated their claims by an average of 35%, whereas the lowest-claim quartile projected their claims much more accurately, within 4%, on average, similar to the average claims underestimate of 6% marketwide."
This indicates "serious adverse experience" occurred among a minority of insurers, the researchers said.
Factoring in reinsurance payments, claims were just 2% higher than insurers projected the first year.