Standard & Poor's Financial Services predicts health insurers selling plans on the ACA individual market will be close, on average, to breaking even this year, if lawmakers don't significantly change the individual market.
This forecast, released Friday, is based on S&P's analysis that most Blue Cross Blue Shield insurers saw improved operating performances on the ACA individual market in 2016 compared to 2015. The ratings agency focused on BCBS plans, since they sell coverage on and off the exchanges and have leading shares of their local individual markets, S&P said.
S&P found most BCBS plans saw improved medical loss ratios for 2016, which represent the percentage of premiums insurers pay in claims. BCBS plans experienced a weighted average MRL of 92 percent in 2016, down from 106 percent in 2015. A MRL below 100 percent means insurers had money left over after paying medical claims.
"Our analysis of 2016 results and the market enrollment so far in 2017 shows that the ACA individual market is not in a 'death spiral,'" S&P stated. "But it isn't on a stable footing either."
The ratings service said insurers' target profitability is still a couple years away because the individual market is in development. In addition, results could be further disrupted by regulatory uncertainty at the federal level.
S&P stated "2018 and beyond are still uncertain given potential legislative changes to the U.S. health insurance market and the pending legal battles over the cost-sharing reduction subsidy," which assists insurers offering discounted premiums to eligible low-income enrollees. Prolonged uncertainty could lead to higher premium rate increases and more exits from the individual market for 2018, S&P states.
Analysts said if the market undergoes a few changes rather than an overhaul, the 2018 ACA individual market could be "one of gradual improvement," leading more insurers to see positive results. However, if large changes to the individual market or cost-sharing reduction subsidies occur, "the market essentially has to restart with a new set of rules," S&P stated.