Health Reform WK-EDGE Individual marketplace not in ‘death spiral,’ it’s improving
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Thursday, April 13, 2017

Individual marketplace not in ‘death spiral,’ it’s improving

By Bryant Storm, J.D.

Health insurers are expected to approach break-even margins in 2017 in the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) individual marketplace, according to Standard and Poor’s (S&P’s) ACA marketplace analysis. The ratings agency noted that while insurers fared better, on average, in the marketplace in 2016 than they did in 2015, the ACA market is continuing to develop and will need more years to reach "target profitability." Additionally although continual changes to the market could significantly upset progress, S&P noted that the marketplace "is not in a ‘death spiral.’"

Five-year path. In earlier estimates, S&P predicted a five-year path to individual market stability, with 2016 serving as year three. Although many insurers continue to operate at a loss, due to administrative costs, the report noted that 2016 was the first year in which progress emerged in terms of receding medical loss ratios (MLRs) for individual market insurers. However, S&P cautioned that despite the progress, the market is not yet on "stable footing."

2017. For 2017, insurers implemented "meaningful premium increases" in part to account for the ending of the ACA reinsurance program. S&P noted, however, that the sharp premium increase did not lead to a drop in enrollment, in large part, due to the stabilizing effect of ACA's income-based advanced premium tax credit (APTC). The analysis predicted another premium increase for 2018. However, S&P noted that the increase would be less substantial than the 2017 increase.

Companies: Standard & Poor’s

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