Despite claims from President Donald Trump and other Congressional Republican leaders that the Affordable Care Act's individual insurance market is in a “death spiral,” that market is actually improving, according to one analysis.
Ratings firm S&P Global looked at the financial performance of 32 Blue Cross and Blue Shield companies that have sold coverage in the individual insurance market since the ACA took effect in 2014.
It found that the medical-loss ratio, which represents the amount of collected premiums spent on medical claims, improved significantly in 2016 for most Blues insurers, which have struggled with the market in the first couple of years. Last year, insurance premiums exceeded medical care costs for the majority of the Blues plans studied.
“We are seeing the first signs in 2016 that this market could be manageable for most health insurers,” the report stated.
Barring any major legislative changes, S&P analysts predict many of the Blues plans will get close to breaking even in their individual market business this year, and more will record a profit in 2018. But that could change if the Trump administration makes any major legislative changes to the healthcare law.
“The market is still fragile,” said Deep Banerjee, S&P analyst and lead author of the report.
The findings are good news for a market that has been plagued with negative headlines and enrollment declines.
Enrollment in the ACA's exchanges fell to 12.2 million in 2017 from 12.7 million the year before. Premiums rose by double-digits on average in 2017. Health insurers have threatened stop selling insurance plans in the individual market next year without a sign that it will stabilize and become profitable soon.
Some have already pulled the plug: Aetna, UnitedHealth Group and Humana, have exited or scaled back their participation in the individual insurance market. And last week, two of Iowa's largest insurers—Wellmark Blue Cross and Blue Shield and Aetna—announced they will no longer offer ACA-compliant individual coverage in the state in 2018, citing financial losses and uncertainty about future insurance regulations.
But many of the Blues insurers have stuck around. They slowly figured out the market, adjusted insurance premiums and tweaked provider networks.
And now they are seeing results: According to the report, the weighted average medical loss ratio, or MLR, for the Blues plans studied was 92% in 2016, down from 106% in 2015 and 102% in 2014. That means for the first time since 2014, the plans collected more money in premiums than they spent on medical claims in 2016.
But while the “individual market is not in a 'death spiral,' it isn't on stable footing either,” the S&P report said.
The Trump administration has yet to address insurers' most pressing concerns about the availability of cost-sharing reductions and the enforcement of the mandate that consumers purchase coverage. The S&P report also notes that enforcement of the ACA's special enrollment periods and enrollment outreach are crucial to the stability of the market.
“If insurers are uneasy regarding the future of the market, they may have to decide between adding an "uncertainty buffer" to their pricing or--worst case--exiting the exchanges altogether,” the S&P report said.