Insurers returning to pre-ACA profitability
Before anyone celebrates too much, analysts warn that the Trump administration’s recent actions “cloud expectations for the future.”
Insurers are once again returning to profitability, doing better in the first half of this year than during the whole span of the Affordable Care Act.
So says a Kaiser Family Foundation study brief, which finds insurers hitting profitability levels they haven’t seen since before the ACA was passed. But before anyone does a happy dance, bear in mind that KFF also said that the Trump administration’s recent actions “cloud expectations for the future.”
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In particular, it cited “the repeal of the individual mandate penalty as part of tax reform legislation and the likely proliferation of loosely-regulated short-term insurance plans” as weighing on market behavior in the future. But there are also the cuts to the open enrollment period and budget cuts to navigators that are making it more difficult for people to sign up, thus shrinking the potential pool of insureds further.
Says the brief, “Results from mid-2018 suggest that despite significant challenges, the individual market remains stable and insurers are generally profitable.” It adds that the individual market shows no signs of a “market collapse.”
While insurers did boost premiums for 2018, some by double digits, citing “uncertainty” surrounding the administration’s past and future actions—such as canceling the cost reduction ratio payments to insurers—the brief pointed out that they may have gone too far, resulting in bigger profits. And sans Trump’s policy changes, the brief says, “it is likely that insurers would generally have required only modest premium increases in 2018.”
In addition, there are signs that people who can no longer afford coverage due to the premium hikes are dropping out of the market, so that those who remain are both sicker and more expensive for insurers to cover. Says the report, “On average, the number of days individual market enrollees spent in a hospital in the first six months of 2018 was higher than in the previous three years, which could be a sign of a modestly worsening risk pool.”
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