In a new report of Blue Cross Blue Shield insurance companies, insurers showed improved operating performance in the Affordable Care Act (ACA) individual market in 2016.
Insurers in the individual market will get closer to break-even margins in 2017, but target profitability is still a couple of years away. There is much unpredictability for 2018 and beyond depending on whether Congress and the DHS make changes to the healthcare system. Standard & Poor's Global Ratings predicted 2018 will show gradual improvement in the individual market and small, positive margins for insurers if the market is largely unaffected by changes.
- S&P said the individual market will become more unstable if Congress makes “significant changes” to the individual insurance market or if the federal government reduces insurers’ cost-sharing reduction subsidies.
S&P reported in 2014 that it would take five years for the individual market to stabilize and 2016 showed the first signs that health insurance companies could manage the individual market.
Many Blues plans have struggled in the market and target margins are still in the future, but S&P said most Blues’ improved their medical loss ratios significantly in the individual market in 2016.
S&P acknowledged problems in the market, including having counties in Tennessee and Iowa with no insurers in the exchange and some counties having only one option in 2018. Plus, four out of five states (Alabama, Alaska, Oklahoma, South Carolina and Wyoming) with only one insurer in the exchange in 2017 didn’t expand their Medicaid program, which leaves those markets unstable.
Those problems will only get worse if the federal government doesn’t resolve uncertainty regarding regulations and subsidies. If leaders don't resolve those issues by May or June, which is when insurers need to file initial rates and products for 2018, S&P predicted higher premium rate increases or more insurers dropping out of the market next year.
Despite what the White House says, the individual market isn’t in a death spiral. In 2018, S&P expects much smaller rate increases than the 25% increase in 2017, and more in line with the 7.5% increase in 2016 and 2% in 2015. Low premium increases will likely stabilize individual insurance membership numbers.