4 observations on ACA performance and results

After the open enrollment period on the Affordable Care Act marketplace closed in January, McKinsey's Center for U.S. Health System Reform closely analyzed the primary drivers of successful results throughout the first three years of the ACA exchange model.

The Center for U.S. Health System Reform identified four primary findings on successful results on the ACA exchanges.

1. The individual market suffered a large loss, but performance varied among states. After 3R — risk adjustment, risk corridor and reinsurance — payments are considered, the insurance industry's post-tax margin was -4.8 percent in 2014, which equates to a loss of $2.7 billion. However, numerous states performed differently. In six states — including California and Washington — more than 75 percent of insurers had positive individual market margins.

2. Insurers who had better financial performance shared multiple key traits. Around 30 percent of insurers reported a positive margin in 2014. Attributes associated with successful plans included HMOs, which had lower losses than PPOs, and narrow network plans, which reported better aggregate margins and lower claims than broad network plans.

3. Initial results from 2015 show performance continues to vary. Although 2015 estimates are continuing to evolve, the Center for U.S. Health System Reform believes aggregate losses on the individual market might have more than doubled since 2014. These losses are attributable to lower reinsurance payments and larger year-over-year medical loss ratios.

4. Due to stabilizing subsidies, there's not a huge risk of a "death spiral." As long as the federal government offers subsidies to individuals within 400 percent of the federal poverty level, the Center for U.S. Health System Reform believes the ACA individual marketplace will likely not evolve into a "death spiral" as many have predicted. Approximately 69 percent of enrollees currently qualify for subsidies, and the Center for U.S. Health System Reform believes this subsidization method is a powerful stabilizer for the market.

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