Early 2017 Financial Data Indicate Stabilizing Individual Insurance Market

Insurer financial data through the first quarter of 2017 suggest the individual market has been stabilizing and insurers in this market are regaining profitability, finds a new analysis from the Kaiser Family Foundation.

The analysis tracks insurer financial performance, starting before the launch of Affordable Care Act marketplaces, through two indicators: Medical loss ratios (the share of health premiums paid out as claims) and average gross margin per member per month (the average amount by which premium income exceeds claims costs per enrollee in a given month).

Large premium increases, typically granted by state regulators, in 2017 contributed to the improved financial performance, as insurers adjusted for a sicker-than-expected risk pool, the analysis finds. However, data on hospitalizations suggest that the risk pool was not getting progressively sicker as of 2017, supporting the notion that the large increases were necessary as a one-time market correction. Slow growth in claims for medical expenses also played a role in insurers’ financial improvements, according to the analysis.

Although the analysis finds the market is stabilizing, ongoing uncertainty over payment of cost-sharing subsidies to insurers and enforcement of the individual mandate could lead insurers to leave the market or charge higher premiums in 2018.