Health insurance companies are making more money than ever from selling Obamacare plans, according to an analysis by the Kaiser Family Foundation.
The organization found that in the first quarter of 2018, health insurers posted a better financial performance than any other year of Obamacare, which started in 2014. The levels of profitability are on track to be about the same as they were before Obamacare went into law.
The Kaiser Family Foundation looked at several factors to arrive at its conclusion. It found that the share of health premiums going toward medical services for its customers fell to 68 percent during the first quarter of 2018. That represents a decrease from 2015, when 88 percent of premiums were paid out on average.
On average, insurers are bringing in $154.54 per enrollee more than they are paying out every month, the study shows. That amount is much higher than the 2015 levels of $36.16 per month.
Insurers had begun to show signs of profitability in 2017, but for the three years before that, they complained about losing money. That was partly because millions fewer people signed up for the plans than expected, but also because insurers didn’t expect the customers’ medical conditions to be as costly as they were, so they priced their plans too low.
As insurers have raised prices, certain consumers are shielded from the increases because they make less than roughly $48,000 a year and can receive subsidies. Others, however, have left the exchanges in favor of going uninsured or taking on the high costs of the premiums.
The Kaiser Family Foundation data indicates that the pool of people who have stayed is becoming sicker, showing more hospital visits than in the past.
“There has been an uptick in hospitalizations during the last year or two. Overall the information suggests that the risk pool is worsening but not so much that it’s making it unprofitable for insurers,” said Cynthia Cox, one of the authors of the report and director of the Program for the Study of Health Reform and Private Insurance.
Several factors led to concerns about how the 2018 insurance exchanges would fare. In fall 2017, President Trump ended payments known as cost-sharing reduction subsidies, and Republicans in Congress tried all year to repeal and replace portions of Obamacare, which advocates feared would lead to confusion over whether the law was still in effect. The Trump administration also cut programs that were meant to inform customers about Obamacare.
As a result, insurers left the exchanges or asked for higher premiums. Many of the insurers that stayed had a monopoly in counties and charged premiums that increased by double digits from the year before.
Ultimately for the 2018 market, certain actions by insurers mitigated the issues customers faced. For instance, after the payments ended, they restructured the way they offered their plans so that people would receive larger subsidies. As a result, a large portion of consumers paid little to nothing for premiums in 2018, with the government shouldering costs instead.
