Health insurers may finally be experiencing something that has eluded them every year since the Affordable Care Act was implemented — stability.
Since 2014, cornerstones of the law intended to limit insurers' losses and help pay for high-risk individuals have been the center of controversy in Washington, D.C., statehouses and state departments of insurance.
Uncertainty over whether federal funding mechanisms designed to attract insurers would stay intact battered insurers' confidence in the newly created ACA market. It appears to have taken five years for insurers to accurately price the market, as shown by modest-to-low new rate requests from insurers for 2019 compared with previous years, experts surveyed by S&P Market Intelligence said.
"The market under the ACA has been stabilizing," said Rabah Kamal, a policy analyst for the Kaiser Family Foundation. "And since insurers have been profiting, on average, after those losses in previous years, they really don't need to raise rates as much as in previous years."
Among the largest companies, just five insurers in three states have requested rate hikes compared to last year, according to an S&P Global Market Intelligence analysis of preliminary rate requests. While those requests are currently being analyzed by state regulators, it is unlikely that they will be substantially changed, Kamal said.
On the uptick
For the first time since 2014, independent not-for-profit Blue Cross and Blue Shield companies have come back strong, BMO Capital Markets analyst Matthew Borsch said.
In 2015, as ACA funding mechanisms were yanked from the law, most of the "Blues" companies booked their first full-year losses since 1987, snapping a nearly 30-year record for reporting insurance profits, Borsch said. Those "horrendous losses" were "squarely as a result of the ACA exchanges," according to the analyst, but health insurers have since come "roaring back."
"Their financials have rebounded tremendously," Borsch said.
Chris Sloan, a senior manager at nonpartisan health research firm Avalere said the market has "stabilized somewhat" because there is little else politicians and regulators can do to destabilize the market. The Center for Medicare and Medicaid Services, which regulates ACA markets, could issue changes to minimum benefits coverage under the law, but those would go into effect for 2020, Sloan said.
"It is looking going into 2019 that we may have finally reached a plateau of how plans have priced in all of the sort of political volatility in things the administration is doing," he said. "And [insurers have] also caught up to the risk of the population when pricing their products."
Experts attributed sky-high premium rate increases in 2017 to a mixture of reduced funding for cost-sharing reductions, the expansion of short-term and association health plans, and the repeal of the individual mandate.
Cost-sharing reductions are payments made to insurers to help pay for high-cost individuals. Their elimination caused many insurers, most notably Anthem Inc., to withdraw from many markets.
The White House also issued an executive order directing the Department of Health and Human Services to lift the cap on how long short-term plans can last, and telling the Department of Labor to allow self-employed workers to band together to purchase small-group coverage called association health plans. Both frameworks allow insurers to offer health plans with less comprehensive benefits than the ACA requires, making them significantly cheaper than ACA-compliant insurance products.
As a result, mostly healthy, low-risk individuals were siphoned off from the individual market, where their participation is critical to keep premiums lower across the board. With funding for the law diminished and premiums skyrocketing, low-risk individuals who did not qualify for subsidies withdrew from the market. That pushed premiums even higher, causing an "actuarial death spiral," BMO's Borsch said.
Congressional Republicans killing the individual mandate further exacerbated the problem; many more insurers may have requested larger rate decreases were it not for the repeal, according to Kaiser's Kamal.
While regulatory volatility and significant rate increases may have defined the marketplace in 2018, the seas seem to have calmed for 2019.
"There are still structural issues, especially related to cost, but we may have, at least for 2019, left double-digit premium increases behind," Sloan said.