Insurers selling individual plans continue to remain profitable despite policy changes that threatened to undermine the Affordable Care Act marketplaces, according to a recent report from the Kaiser Family Foundation.
An analysis of insurers' first quarter performance in 2019 found carriers continued to remain profitable on average. Premiums also fell slightly for the first time since the marketplaces launched, the report found.
Although there have been modest increases in claims costs in the first quarter, the overall performance is positive despite previous fears.
"Earlier concerns that the market would collapse or insurer exits would lead to counties with no coverage available at all have proven unfounded," KFF reported.
Many feared the marketplaces would be left with fewer enrollees and a sicker population after the Trump administration expanded the availability of short-term health plans, which are typically a cheaper alternative but don't contain the same consumer protections as marketplace plans. The repeal of the individual mandate penalty also sparked concerns about driving consumers away from the marketplace.
It's likely that 2019 premiums would have dropped even more if not for those two major policy changes "that put upward pressure on prices," according to the report.
Many insurers factored other policy changes into their rates heading in 2018 and it may have been an overcorrection, which is why premiums decreased in the first quarter of 2019, KFF said.
The average gross margins for insurers did dip slightly in the first quarter compared with 2018's first quarter. However, 2019 first quarter margins remained higher than all other previous years through 2017.
Average gross margins were $134 per member per month in the first quarter of 2019, compared with $155 in 2018.
Blue Cross Blue Shield plans tended to outperform their peers on average gross margins calculated as a per member, per month figure.
Insurers are beginning to file their 2020 rates and KFF said the premium increases appear modest so far.
The medical trend, which is based on the cost of services, appears to be consistent with 2019, according to a recent report from the American Academy of Actuaries. The medical trend ranged from 5% to 8% in 2019.
But there are other drivers fueling — or, in some states, curbing — the pressure on rates for 2020.
"Premiums and premium changes could vary significantly by state depending on state market dynamics and any state-specific rules or initiatives," according to the actuaries report.
To reduce costs, some states have imposed their own individual mandate while others such as California have moved to block the sale of short-term health plans.
However, many insurers did not take into account a new rule that could reshape how benefits are provided to many working Americans.
Starting Jan. 1, employers will be able to provide money to employees in a standalone tax-exempt health reimbursement account (HRA), allowing employees to shop for coverage on their own on the marketplaces.
An influx of of workers to the marketplaces could help stabilize the individual market, although the actuaries warned there could be a downside.
"If employers with less-healthy workers shift to offering individual market HRAs, the premiums in the individual market will increase."
Insurers will soon begin reporting their financial performance for the second quarter, which will provide more information on how payers are performing on the exchanges. Also coming up are further court proceedings on the constitutionality of the ACA itself, with hearings set next week on the appeal of a federal trial judge's ruling from late last year.