- Insurers in the individual market saw better financial performance last year than in any other year since the Affordable Care Act was implemented, according to a new Kaiser Family Foundation analysis. Researchers also concluded payer profitability in the individual market in 2018 could have even returned to (or exceeded) pre-ACA levels.
- Premiums dipped slightly for 2019, the study found, due to payers hiking 2018 rates more than necessary. And premiums could have dropped even lower if the individual mandate penalty had not been revoked for the 2019 plan year, KFF concluded.
- The report also found insurers expect to shell out a record amount in rebates to individual market consumers for not meeting the ACA's medical loss ratio threshold in 2018 — roughly $800 million. Payers estimate their overall rebate bill to tally up at $1.4 billion this year overall across the individual, small group and large group markets — the largest amount in consumer rebates issued since the medical loss ratio program, which mandates payers spend a minimum of 80% of premium revenues on medical care and healthcare quality improvement, began in 2011.
The ACA has been marred by instability since its beginning — politically, legally, in the exchanges and in the overall individual market.
The Department of Justice declined in late March to defend the health law after a federal judge declared it unconstitutional in a controversial ruling now in front of the Fifth Circuit Court of Appeals and scheduled for oral arguments in July.
The Trump administration lowered administrative and advertising costs for enrollment in the ACA exchanges for the 2019 plan year, pared down funding for groups that help consumers navigate enrollment and has slashed the enrollment period in half for the past two years: moves critics say contributed to lower rates of enrollment this year.
Additionally, CMS continues to promote the use of waivers that give states the ability to work around key components of the ACA when structuring their insurance markets. The agency has also touted the benefits of short-term health plans that critics say don't provide comprehensive coverage and could tempt healthy enrollees out of the individual markets.
But by all indications, insurers are now financially healthy in ACA markets, KFF found, affirming the research group's analysis last year showing profitability was beginning to grow in the marketplace. Loss ratios began to decline from a peak of 103% in 2016, and gross margins grew exponentially from 2015 to 2018, suggesting improving financial performance driven by premium increases in 2018 and "modest" growth in medical claims.
Evidence of stability in the exchanges is welcome for payers that have remained bullish on the ACA, such as Oscar and Centene. Some large payers including UnitedHealth Group, Aetna, Humana and Anthem pulled partially out or completely out of the exchanges for 2018.
Centene alone saw its membership grow by 1.8 million members during 2018, mostly due to increased participation in ACA exchanges.
An ongoing concern tied to ACA performance is whether higher premiums, deductibles and out-of-pocket costs (along with the temptation of cheap short-term health plans promoted by the Trump administration) will cause healthy people to drop out of the ACA exchanges. Such a decrease would raise costs across the board for sicker enrollees.
However, that isn't happening yet, KFF determined. Though claims and utilization data suggest the individual market risk pool is on average sicker than in pre-ACA days, low average inpatient days indicate the market wasn't sicker than before in 2018.
But KFF warned Trump administration efforts to undermine key tenets of the ACA could undo any increased stability found in the exchanges for payers.
"These new data from 2018 offer further evidence that insurers in the individual market are regaining profitability, though more recent policy and legislative changes taking effect in 2019 — the repeal of the individual mandate penalty as part of tax reform legislation and the proliferation of loosely-regulated short-term insurance plans — continue to cloud expectations somewhat for the future," researchers said.