Individual insurance market shows signs of stabilizing, report finds
A new Kaiser Family Foundation (KFF) report that reviewed Q1 insurance company financial data found that the individual health insurance market is stabilizing and insurers are regaining profitability.
The individual market's risk pool is stable and not getting sicker, which KFF said shows that healthy Americans are not fleeing the market. Though the market may be stabilizing, KFF said there are still “more fragile” parts of the country and that policy uncertainty coming from Washington could destabilize the market.
Meanwhile, the CMS announced on Monday that the number of payers who applied to take part in the health insurance exchanges for 2018 dropped by 38% compared to 2017. Rates will be finalized in mid-August.
KFF said mixed signals from President Donald Trump's administration and Congress about cost-sharing subsidy payments and whether the individual mandate will be enforced have caused some insurers to leave the market or to request large premium increases.
Despite those issues, KFF said payers in the individual market continue to show improvements in the medical loss ratio (MLR), which is the percentage of premium dollars that an insurer spends on medical claims. MLR started to decline in 2016 after years of poor performance after the Affordable Care Act (ACA).
KFF said payers' MLR has improved as the federal government added regulations and payers learned how to work in the new individual insurance market after the ACA. The first quarter data saw the individual market’s MLR averaging 75%. This is an improvement over the first quarters of the first few years after the ACA, including 88% in 2015 and 86% in 2016.
Insurers finished 2015 with a 103% MLR and 2016 with a 96% MLR. KFF has said insurers need to drop their MLR to 85-90% to make the individual market profitable.
KFF warned that first quarter loss ratios can be 10 to 15 percentage points lower than the final annual loss ratios. However, the first quarter numbers still show “that individual market insurers on average are on a path toward regaining profitability in 2017,” according to KFF.
KFF said payers in the individual market also improved averages for gross margins per member per month. Individual gross margins per member per month skyrocketed from $48.13 in the first quarter of 2016 to $99.43 in the first quarter of this year. “As with medical loss ratios, first quarter margins tend to follow a similar pattern to annual margins, but generally look more favorable as enrollees are still paying toward their deductibles in the early part of the year, lowering claims costs for insurers,” according to KFF.
That’s the good news, but there are also concerns in the report. Premium increases helped stabilize the individual insurance market. KFF found that premiums per enrollee grew 20% on average from the first quarter of last year compared to the first quarter of this year, while per person claims grew by only 5%. This means that members are paid much more on premiums than what payers spent on claims in the first quarter.
The average first quarter individual market monthly premium this year increased to $403 compared to $337 last year.
Higher premiums haven’t caused healthy people to flee the market. KFF found that enrollees are not “noticeably sicker” than last year and the average number of inpatient days for individual market enrollees were similar to the previous two years.
“Taken together, these data on claims and utilization suggest that the individual market risk pool is relatively stable, though sicker on average than the pre-ACA market, which is to be expected since people with pre-existing conditions have guaranteed access to coverage under the ACA,” said KFF.
KFF’s largely favorable picture of the individual market mirrors its report in April that said the market showed “signs of stabilizing" and a Standard & Poor's report that noted Blue Cross Blue Shield insurance companies improved operating performance in the ACA exchanges in 2016.
However, it’s not all positive news for the market. The CMS on Monday said that only 141 payers have applied for health plans in the ACA exchanges in 2018, which is a drop from 227 payers last year at the initial filing deadline.
CMS Administrator Seema Verma, who has been an outspoken critic of the ACA exchanges since taking office this year, pointed to the finding as “further proof that the Affordable Care Act is failing.”
“Insurers continue to flee the exchanges, causing Americans to lose their choice for health insurance or lose their coverage altogether. These numbers are clear: the status quo is not working. The American people deserve healthcare choices and access to quality, affordable healthcare coverage,” she said in a statement.
Major payers like Anthem, Aetna and Humana have pulled back or are completely out of ACA exchanges for 2018. Despite payers like Centene filling gaps in 2018, counties in Nevada, Indiana and Ohio are at risk of not having any ACA exchanges option in 2018. There is also the issue of many counties only having one choice. Avalere recently found that 41% of counties may only have one payer option in 2018. Less competition among payers is likely to increase costs for providers.
Large premiums increases are expected in 2018. For the second straight year, the average rate increase is expected to reach 20%. Payers who want to take part in the exchanges have until the end of September to file a Qualified Health Plan (QHP) contract.
- Kaiser Family Foundation Individual Insurance Market Performance in Early 2017
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- Healthcare Dive Centene will fill Missouri ACA exchange gaps