How Are Health Insurers Faring Under the ACA?
<p>The first year of the health insurance marketplaces established by the Affordable Care Act presented substantial challenges for insurers, which had to make assumptions about their enrollees’ medical costs and decide how high to set premium prices to ensure these costs and overhead expenses would be covered. </p><p>For their new Commonwealth Fund <a href="/publications/issue-briefs/2016/jul/how-has-affordable-care-act-affected-health-insurers-financial">issue brief</a>, researchers Mark A. Hall and Michael J. McCue look at how insurance companies performed financially in the first year of full ACA reforms. Overall, insurers’ premium revenue from individual market plans increased 97 percent between 2012 and 2014, owing to the large number of new enrollees through the marketplaces. Profits varied, however, with a third of insurers remaining or becoming profitable and two-thirds losing money. The majority of unprofitable insurers also did not turn a profit the previous year, before the ACA was implemented, the authors note. </p>
<p>Hall, a professor of law and public health at Wake Forest University, and McCue, a professor of health administration at Virginia Commonwealth University, also find that medical costs were only 2 percent higher than insurers expected in the individual market. The authors say this was largely because the ACA’s reinsurance provision, which protects carriers from large losses on enrollees with very high medical costs, worked as intended. In an accompanying <a href="/blog/2016/how-reinsurance-limited-health-insurers-financial-losses-acas-first-year">blog post</a> on <em>To the Point</em>, Hall and McCue discuss the key role played by the reinsurance program.</p>