- Health insurers’ profitability once again is under scrutiny this week. A new report from the White House Council of Economic Advisers asserts that despite initial financial losses in the individual market after the Affordable Care Act went into effect, insurer stocks have outperformed the S&P 500 by 106% since Jan. 1, 2014.
- The report claims that stable year-over-year enrollment combined with large premium hikes “suggests a distorted market that involves large transfers from taxpayers to insurers.” The report notes the recent tax bill made law has helped health insurer profitability.
- “While insurers initially incurred losses in the ACA marketplaces as they adjusted to new regulations and a relatively unhealthy risk pool, insurers are now profiting on the individual market as well, with higher premiums that are largely covered by federal premium subsidies,” the report says.
The insurance lobby pushed back against the findings, saying health insurance is a low-margin business. America’s Health Insurance Plans blasted a lack of cost sharing reduction (CSR) payments and lack of reinsurance as reasons for rising premiums.
“On average, insurance provider net profits are in the low- to mid-single digits for their commercial products — and trend lower for government program products such as Medicare Advantage and Medicaid managed care. With the Medical Loss Ratio specified by federal law, at least 80 to 85 cents of every dollar a consumer spends on premiums goes to cover medical claims and improve healthcare quality,” Kristine Grow, AHIP SVP of communications, told Healthcare Dive.
But the White House report says that many insurance companies’ net profit margins have returned to pre-ACA levels. Earnings projections have been hiked after the passage of the GOP tax bill by UnitedHealth Group and Humana, it added.
In addition, the report stated as of 2017 most Blue Cross Blue Shield regional insurers that are the main insurers in ACA-compliant individual and small group markets have also returned to pre-ACA profitability.
But a recent Robert Wood Johnson Foundation report found that insurers in the ACA markets still face uncertainty over the coming years given the rollback of the individual mandate, concern that restoring CSR payments could disrupt the market for people receiving premium subsidies and the risk that an expansion of short-term, limited-duration plans and association health plans could further disrupt ACA market stability.