The individual insurance market is “showing signs of stabilizing” after years of unease and substantial insurer losses following the Affordable Care Act, the Kaiser Family Foundation (KFF) concluded in a new report.
Individual market insurers’ medical loss ratio (MLR), which is the percentage of premium dollars that an insurer spends on medical claims, has been high since the Affordable Care Act. However, the MLR dropped by 7 percentage points between 2015 and 2016 to 96%. That’s a positive, but still a higher percentage than before healthcare reform. The Kaiser Family Foundation said insurers need to drop their MLR to 85-90% to make the individual market profitable.
The Kaiser Family Foundation noted insurers may “significantly improve their financial performance” in the individual market in 2017. However, the KFF warned that health insurers still face uncertainty. President Donald Trump's administration and Congress have given mixed signals about healthcare reform, whether the federal government will enforce the individual mandate, and whether the government will pay cost-sharing subsidies to insurers. KFF warned the upheaval could still cause insurers to drop out of the market even though it’s showing signs of improvement.
The healthcare industry and the nation’s political leaders are watching the individual market closely because of its connection to the Affordable Care Act exchanges.
KFF’s report is good news for insurers but whether the individual market shows more growth over the next few years will depend largely on the White House and Congress and how insurers react. The individual market will have trouble if the industry loses cost-sharing subsidies or if many insurers leave the market.
Last week, Anthem signaled that it may offer marketplace plans in Virginia and Kentucky next year and Cigna and Aetna both showed interest in Virginia. A third major insurer, UnitedHealthcare, said it does not plan to stay in the Virginia market next year.
Meanwhile, state insurance regulators in Colorado, New Hampshire, Oregon and Kentucky are extending the deadline for insurers to submit rates for insurance exchanges. Insurers are still unsure about cost-sharing subsidies and whether another healthcare reform bill will emerge.
The next two months will be key for the future of the individual insurance market. Insurers may pull out of the exchanges if the nation’s leaders continue to give mixed signals or even kill cost-sharing subsidies. A domino effect may result and leave thousands of millions of people without any health insurance options.