AM Best Information Services

JANUARY 03, 2018 09:10 AM (EST)

Best’s Briefing: Growing Stability Prompts Revision of U.S. Health Insurance Industry Outlook to Stable

 Sally Rosen
Senior Director
+1 908 439-2200, ext. 5280

Doniella Pliss
Associate Director
+1 908 439-2200, ext. 5104

Joseph Zazzera, MBA
+1 908 439-2200, ext. 5797
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


OLDWICK - JANUARY 03, 2018 09:10 AM (EST)
A.M. Best is revising its outlook on the U.S. health insurance industry to stable from negative for 2018, citing that insurers overall have been able to adapt to the pressures from the Patient Protection and Affordable Care Act (ACA) and improve earnings and risk-adjusted capitalization levels.

A new Best’s Briefing, titled, “Market Segment Outlook: U.S. Health,” states that the lower level of profitability in 2014 and 2015 was driven by the commercial individual segment, and although the individual exchange business has reported losses, this segment still constitutes a small portion of health insurers’ operations. Other product lines, particularly the employer group segment, as well as the Medicaid and Medicare Advantage lines of business, remain profitable.

The briefing notes that the ACA exchange business improved in 2016 and 2017, driven partially by consecutive years of high rate increases and a narrowing of provider networks. The exchange membership still has a concentration of individuals who are higher risk and greater utilizers of services, but the exchange population has stabilized. A.M. Best had been concerned that with the potential for a repeal or replacement of the ACA, an increase in utilization would occur in 2017 as individuals might rush to seek medical treatments and services before losing coverage. However, this spike did not occur, and medical cost trends were relatively flat in 2016 and 2017. A repeal and replacement of the ACA is still a possibility; however, A.M. Best believes that after several failed attempts to pass a bill in 2017, the U.S. Congress may choose to focus on other issues over the next fiscal year. Other factors creating a more stable marketplace include the decrease in the number of carriers participating in the ACA exchanges and more membership continuity and consistency.

According to the briefing, the elimination of the cost-sharing reduction (CSR) subsidy payment in fourth-quarter 2017 will have a slightly negative impact on earnings. However, most carriers had already received a sizeable portion of the payment for the year. Additionally, the elimination of the CSR subsidy will not have an impact in 2018 for most carriers, as many state regulators allowed plans to adjust premium rates prior to the open enrollment to avoid a potential negative financial impact. In addition, the tax-bill’s repeal of the individual mandate, which removes the penalty for not having insurance, does not take effect until 2019.

Negative factors continue to impact the industry, but A.M. Best believes that insurers overall have been able to adapt and as a result, does not expect any significant deterioration in market conditions over the next year.

For the full copy of this briefing, please visit .

A video interview with Joseph Zazzera, director, about the U.S. health insurance industry also is available.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.