Health insurance companies are beginning to do a little better financially when it comes to participating in the Obamacare exchanges, findings from a Kaiser Family Foundation analysis suggest.
The analysis, published Monday, comes after several insurers have announced their intent to leave the exchanges next year, citing both massive losses and uncertainty about the future of the healthcare law.
However, several signs have emerged that the exchanges are stabilizing, according to the analysis. Its authors noted that enrollees in the plans did not appear to be sicker, and therefore more costly, compared to previous years, and that the average amount by which premium income exceeded claims costs per enrollee appear to be more favorable.
The share of health premiums paid out as claims, known as medical loss ratio, has started to go down. During the first quarter of this year, insurers paid out 75 percent of their premiums in claims. The percentage represents an improvement over the first quarter of 2015, when 88 percent of premiums were paid out in claims.
The figures in the analysis represent simple loss ratios, which are not the same as the definition of medical loss ratios in Obamacare, and do not adjust for quality improvement expenses, taxes or risk program payments. The law's definition requires that 80 percent of premiums be paid out in claims.
Republicans are debating how to repeal and replace portions of Obamacare, and Senate Majority Leader Mitch McConnell, R-Ky., has said that if they fail to pass a bill then they will need to work with Democrats on stabilizing the exchanges. Insurers have openly told Congress and the Trump administration that they need to know how much to expect in federal funds to participate in the exchanges next year, and to know how much to charge customers in premiums.
Authors of the Kaiser Family Foundation study concluded that the data provide evidence that the individual market has been stabilizing and that insurers are profiting. Gross margins per member per month reached $99.43 in the first quarter of 2017, compared to $48.13 during the first quarter of 2016.
"If Congress wants to keep the individual insurance market stable, it may not actually be such a heavy lift," tweeted Larry Levitt, one of the authors of the study and a senior vice president for special initiatives at the Kaiser Family Foundation.
The exchanges created under Obamacare allow most people who do not receive coverage from an employer to buy private plans that are subsidized by the federal government. In previous years, insurers have said that their participation in these exchanges has resulted in millions of dollars in losses, and many of them have fled different counties or even entire states. It's possible that part of the overall stabilization for insurers may be attributable to their decision to exit specific markets where they were accumulating massive losses.
To make up for losses, they also have requested double-digit rate hikes, both for this year and looking ahead to next year. Republicans have used these outcomes to support their intent to repeal and replace portions of Obamacare, saying that the exchanges are "failing" and that the law is "collapsing."
Defenders of Obamacare have argued that the hikes that occurred last year, which averaged 22 percent across the country, were part of a one-time correction. They have also said that the double-digit rate hikes expected for next year in a handful of states are a result of uncertainty introduced into the marketplace by the Trump administration. President Trump has not committed to paying insurers cost-sharing reduction subsidies, which are mired in a legal battle, and insurers don't know the extent to which the administration will enforce Obamacare's individual mandate, which obligates people purchase insurance or pay a fine.
Insurers have blamed both the design of the exchanges and the uncertainty injected into the market for their financial troubles in this area. They have said that not enough healthy customers have enrolled to balance out the cost for covering sicker, more costly enrollees. Several have already announced next year, after their first-quarter results came in, that they plan not to participate in the exchanges in certain counties or states.
Others have expanded their presence or stepped in to counties that were facing the prospect of not being able to buy tax-subsidized insurance for next year.