The individual health insurance market is showing signs of stabilization, according to a Kaiser Family Foundation report. If claims expenses don't increase unexpectedly, payers may see "significant" improvement in their 2017 individual market businesses.
The foundation's report is comprised of insurer data reported to the National Association of Insurance Commissioners from 2011 to 2016 and an analysis of payers' average medical loss ratio on individual marketplace plans during that period. MLR refers to the portion of premiums an insurer pays out in claims.
Insurers struggle to maintain profitability when MLRs exceed between 85 percent and 90 percent, KFF states. When the ACA's exchanges opened in 2014, insurer's individual MLRs averaged 98 percent, up from 84 percent in 2013. Individual market MLRs grew to an average of 103 percent in 2015, and only began to fall to about 96 percent in 2016 when insurers raised premiums higher than their claims rates.
KFF predicts insurers' financial performance on the individual market could "significantly" improve in 2017, as long as claims expenses don't increase suddenly. The foundation said this is because insurers substantially raised premiums for 2017 plans — an average of 22 percent — and marketplace enrollment has been mostly steady.
"Though this can be taken as a sign that the market is stabilizing, health insurers still face tremendous uncertainty going forward," the report concluded. "Mixed signals from the administration and Congress over the direction and timing of ACA repeal efforts, and a lack of clarity on individual mandate enforcement and payments for cost-sharing subsidies, could make insurers hesitant to continue to participate, even if the market is showing signs of improving otherwise."