Coming off of a profitable 2018, health insurers were still making money selling plans on the individual insurance market, including the Affordable Care Act exchanges, during the first three months of this year, an analysis by the Kaiser Family Foundation shows.
Insurers remained profitable even though the individual mandate requiring most people to buy health coverage was zeroed out and cheaper, skimpier short-term plans became widely available, researchers found.
"The individual insurance market under the ACA still appears stable and sustainable," said Larry Levitt, Kaiser Family Foundation's senior vice president for health reform and an author of the brief. "The market still stubbornly refuses to collapse, as some have predicted."
Levitt said he expected individual market insurers to remain profitable throughout 2019, which should lead to modest premium increases in 2020.
Early rate requests show that is the case. New York insurers asked for an average rate increase of 8.4%; Oregon insurers requested an increase of 3.3%; and Vermont insurers asked for a 12.5% increase on average, from Georgetown University's Center on Health Insurance Reforms. In contrast, insurers hiked premiums an average 32% for the most popular ACA exchange plans in 2018 and rates held pretty steady in 2019, decreasing slightly by an average 1.5%. Still, the exchanges remain expensive, particularly for people who do not qualify for federal financial help.
Kaiser Family Foundation used two metrics, including loss ratios and margins, to analyze health insurers' profitability with financial data reported by the companies to the National Association of Insurance Commissioners.
They found that insurers' simple medical loss ratios—defined as the share of premiums paid out as medical claims—averaged 73% in the first quarter of 2019. For every premium dollar health insurers brought in, they paid out 73 cents to cover medical claims. While that's higher than the 68% average loss ratio reported during the first-quarter 2018, when companies hiked premiums higher than necessary, it's lower than the loss ratios reported in the early years of the exchanges. Average first-quarter loss ratios peaked at 88% in 2015.
The ACA requires health insurers to spend at least 80% of premium revenue on claims or quality improvements or refund the difference to customers. Insurers are expected to pay back $800 million this year to make up for too-low medical loss ratios in 2018.
Similar to the loss ratios, health insurers' average gross margins per member per month were $134 in the first quarter, a decrease from last year's first quarter at $155 but still higher than all previous years going back to 2011, according to the brief. Gross margins show the average amount that premium income exceeded claims costs per enrollee.
Testingers also wrote that claims costs in the first quarter of 2019 continued to grow at a rate similar to past years, suggesting that policy changes did not cause as many healthy people to ditch the exchanges as expected.