Despite strong premium growth, health insurers are not seeing profits in the individual market, and it will take longer than anticipated for that market to stabilize, according to a recent report.
The report from Standard and Poor's Ratings Services says there likely will not be a stable market until 2018, which is two years longer than projected when the Affordable Care Act began transforming the individual market landscape.
Experts speaking at a panel discussion hosted by McGraw Hill Financial on Wednesday said the high claims activity in 2014 and 2015 may level off as pent-up demand wanes and the risk pool matures.
Deep Banerjee, an author of the report and the director of S&P Ratings Services, said insurers did not have enough data to properly set premium prices in 2014 and 2015. He said some were pricing aggressively to gain market share early. Next year, insurers will have more information about claims and participants.
He said 2017 "is a key year because now insurers can price more accurately.”
Losses from the marketplaces have led the nation's largest health insurance company to consider pulling out of the exchanges completely. Others say they too are struggling. More than half of the not-for-profit co-ops created under the ACA have been shuttered because of financial losses.
More of the coveted “young invincibles” could enter the market as the tax penalty for not having insurance increases. However, there likely still won't be enough healthy people in the pools to even out the risk, he said.
The report notes that insurers will benefit from the one-year moratorium on the industry tax, which would have raised $13.9 billion for the federal government. They will also, however, lose reinsurance protection next year. The reinsurance program, one of the three risk-adjustment programs under the ACA, paid out nearly $8 billion to insurers each of the last two years. The program is ending after this year.
Companies were also stung by the White House decision in 2014 to allow people to keep plans that didn't comply with ACA regulations for another two years.
Michael Taggart, a consultant with S&P Dow Jones Indices, said providers will have to begin accepting risk through accountable care organizations to lessen the blow of increasing costs. Now, insurers see narrowing networks as one of the few ways to improve their bottom line.
Mandy Cohen, chief operating officer at the CMS, said her main concern with narrowing networks is transparency. Consumers should not be surprised and should be able to compare plans easily.
