The Patient Protection and Affordable Care Act (ACA) introduced many changes to the individual health insurance market beginning in calendar year (CY) 2014, including new rating rules and the introduction of federal financial assistance to purchase health insurance through the insurance marketplaces. It is important for state policymakers to understand the health and stability of the individual health insurance market and how the ACA has affected its health insurance consumers.
Milliman actuaries Paul Houchens, Jason Clarkson, and Zachary Fohl have prepared a profile of the individual health insurance market for each state along with the District of Columbia (DC). The profile summarizes insurer financials, marketplace enrollment, and federal assistance provided to households purchasing insurance coverage through the insurance marketplaces, incorporating recently released data from the 2017 open enrollment period.
Milliman has released its annual report on the commercial health insurance market’s financial results, which provides a clear picture of health insurers’ financial experience in a given year. The report, based on medical loss ratio data submitted to the Centers for Medicare and Medicaid Services (CMS) and released in the fall of 2016, provides a final accounting of insurers’ financial results after “3R” transfer payments have been completed. Today’s report details results for 2015, the second full year of implementation of the Patient Protection and Affordable Care Act (ACA). The report also summarizes estimated effectuated insurance marketplace enrollment through 2016 and corresponding federal expenditures on premium and cost-sharing assistance. As the United States approaches a potential new round of healthcare reform, Milliman’s report is a helpful tool in analyzing the effect of current ACA financial assistance components to consumers and the impact on the health insurance industry from the insurance marketplaces and “3R” programs.
Key takeaways from Milliman’s report include:
• Underwriting margins in the individual market deteriorated from a 6.0% earned premium loss in 2014 to a 9.6% loss in 2015. The 2015 underwriting losses were due in large part to the risk corridor program funding shortfall.
• With no funding currently scheduled, the cumulative risk corridor payment shortfall has reached $8.3 billion, with nearly 90% owed to insurers in the individual market.
• Since 2013, individual market enrollment has increased from 10.9 million to 17.5 million, driven by the introduction of the insurance marketplaces and associated premium assistance. Conversely, the fully insured small group enrollment has shrunk from 17.3 million to 14.7 million, which is attributable primarily to fewer small employers offering coverage.
• The insurance marketplaces continued to take on a greater role in the individual health insurance market, with 56% of estimated 2016 market-wide enrollment attributable to coverage purchased in the marketplaces, relative to only 36% in 2014.
• From 2014 to 2016, the percentage of individual market enrollees receiving premium assistance has increased from 31% to 47%. Similarly, enrollment in cost-sharing reduction plans is estimated to have increased from 21% to 32% of national individual market enrollment.
Milliman’s overview of financial results provides a comprehensive look at insurers’ financial experience as well as the number of Americans impacted by marketplace subsidies under the ACA. As new healthcare proposals are debated in Washington, we believe this report provides a valuable tool for policymakers and insurers looking to better understand how insurance markets may react to future regulatory and legislative changes.
To receive regular updates of Milliman’s healthcare reports, contact us at here.
The commercial health insurance markets in the United States in 2014 experienced a significant change relative to prior years. These changes were most dramatic in the individual health insurance market, with the conversion from medical underwriting to adjusted community rating in many states, as well as the implementation of the federal and state insurance marketplaces, facilitating premium assistance to many Americans who were previously uninsured. The 2014 edition of Milliman’s annual report on the commercial health insurance market provides an overview of financial results in the individual and group insurance markets. The report also focuses on enrollment changes in the individual market and the impact of the Patient Protection and Affordable Care Act of 2010’s (ACA) risk adjustment and risk corridor programs.
New information from the U.S. Department of Health and Human Services allows for further evaluation of the federal exchange auto-enrollment process, including the cost implications for consumers of auto-enrollment versus redetermination. For 2014 consumers, there are several key issues to consider when making purchasing decisions for 2015. And for insurers, the federal auto-enrollment period creates a number of interesting marketing dynamics.
This healthcare reform briefing paper authored by Milliman’s Jason Clarkson, William Gibula, and Paul Houchens discusses the potential impacts to the 2015 federal exchange market as a result of the federal auto-enrollment process and examines the effects that proposed 2017 changes to the process may have on insurers and consumers.
With the enactment of the Patient Protection and Affordable Care Act (ACA), health insurers have had to comply with several requirements. The insurer experience in 2013 reflects the third year insurers have been required to comply with federal minimum loss ratio requirements. This Healthcare Reform Briefing Paper by Milliman’s Paul Houchens, Jason Clarkson, and Colin Gray provides an overview of health insurer financial results in 2013.
Here is an excerpt from the report:
How have financial results changed since 2010?
With four years of insurer financials available, assessments of the ACA’s impact on insurer expense structure and profitability prior to the 2014 rating reforms can be made. Figure 2 provides the incremental change in costs from 2010 to 2013 for insurers reporting financial results during all years between 2010 and 2013. For example, in the individual market, earned premium PMPM has increased approximately $27 from 2010 to 2013.
Figure 2 indicates that premium increases in the group insurance markets tracked very closely with claims expense increases. However, in the individual health insurance market, growth in claims expenses outpaced premium growth by nearly $10 PMPM. This is the primary reason why the medical loss ratio percentage increased by 5.5% in the individual insurance market from 2010 to 2013, despite an increase in administrative expenses on a PMPM basis.
Figure 3 provides a visual representation of changes in each market’s financial structure from 2010 through 2013. Total administrative and claims expense are represented by the red shaded bars, while carrier earned premium is represented by the green outline surrounding the bars. As illustrated by this figure, the gap between earned premium and the sum of administrative and claims expenses has remained consistent in the group markets from 2010 through 2013, yet has been eliminated over the four-year period in the individual market.
The Center for Consumer Information and Insurance Oversight (CCIIO) has released insurer plan information for the federally facilitated exchanges in 34 states for the individual exchange market and 32 states for the Small Business Health Options Program (SHOP) exchange market. This information covers the state and federal exchanges since they opened October 1, 2013.
This newly released plan information gives consumers and the health insurance industry the first opportunity to view the landscape of the new exchange market and provides key insights into the makeup of the insurance markets.
Premium and plan information for each plan offered in the federal exchange is provided by state, exchange rating area, and county. Therefore, we are now able to see the large variation between the number of participating insurers, new entrants, and plan designs available on the federally facilitated exchanges, which vary greatly not only between states, but within states at the county level.
In some states, market share in the individual and small group markers may be minimally impacted by the exchange marketplace. However, in states that have insurers with significant current market share declining to participate in the exchanges, or in states with new Medicaid or Consumer Operated and Oriented Plan Program (CO-OP) insurers entering the market, market share may change significantly in a short period of time.
This Healthcare Reform Briefing Paper by Paul Houchens, Mike Sturm, and Jason Clarkson provides perspective on insurer participation and consumer choices in the 34 states where CCIIO data is available.