Insurers' losses on ACA plans narrow in 2016

Health insurers lost less money on individual insurance plans in 2016 than they did the year before, but those losses still totaled billions of dollars.

Insurers selling plans in the individual insurance market on and off the exchanges lost between 7% and 9% of premiums, compared with 10.1% of premiums in 2015, according to a report released Friday morning by consultancy McKinsey & Co. That's because enrollment increased in individual plans last year, so insurers made more in revenue.

In aggregate, insurers lost between $5.5 billion and $7.5 billion in 2016, compared with $7.2 billion in 2015.

"Carriers in the 2016 individual market did not experience the kind of steep margin deterioration that occurred between 2014 and 2015," the report stated.

But while margins improved overall, some insurers fared better than others.

The not-for-profit Blues plans showed the greatest improvement in margins. Their post-tax margins landed between 4% and -7% in 2016, compared with -11% in 2015. The finding is consistent with an April S&P Global report, which found the medical-loss ratio for most Blues insurers improved significantly in 2016. Last year, insurance premiums exceeded medical care costs for the majority of the Blues plans studied.

But for national insurers, such as Anthem and Aetna, margins worsened from -7% to between -9% and -12%, the McKinsey report found. National insurers UnitedHealth, Aetna, Anthem and Humana have either scaled back their participation or exited the individual market completely.

Medicaid insurers' margins still hovered in negative territory between -1% and -6%. It is unclear whether regional and co-op health plans' margins improved or worsened, the report said.

Margins for provider-owned health plans were between -15% and -19% in 2016. McKinsey suggested that's one reason 15 provider-owned exchange insurers exited the market in 2017.