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The Individual Health Insurance Market

By July 20, 2017Commentary

The individual health insurance market draws attention because under the reform law, health insurance exchanges were created in every state to facilitate availability of health insurance to people who did not have access to other forms of coverage.  It is an understatement to say the exchanges have not lived up to the promises made about them and the last two years have been particularly tumultuous.  But a non-exchange individual market remains in place in many states.  A new brief from Mark Farrah Associates examines how both exchange and non-exchange individual markets are faring.   (MFA Brief)   According to the federal Health & Human Services Department, 12.2 million people were enrolled in exchange plans after the 2017 open enrollment period.  (Please note that this is far short of the original and revised CBO projections.)  About 75% of these people came in through the federal exchange version, with the remainder using state-operated ACA exchanges.   In addition, in regular reports to state regulators, insurers said they provided individual coverage to another 5.36 million persons.

Many large insurers have simply given up on exchange-based individual health insurance policies.  UnitedHealth, the nation’s largest insurer, has withdrawn from all but a couple of states.  Humana left many states in 2017 and has announced it will leave the rest in 2018.  Aetna also has said it will leave all, or almost all state exchanges.  Anthem has departed most of the states in which it does business, as has Cigna.  A number of regional Blue Cross plans are also scaling back on their exchange business.  This has left a few areas of the country with no insurers on the exchange and most with a significant reduction in the number of competitors.  On the other hand Medicaid insurers Centene and Molina have said they either will retain coverage or may expand.  And some new market entrants like Oscar have also indicated an intent to do an exchange business, but these entities have erratic track records, at best.  For 2017, Anthem, Centene, Kaiser, Blue Cross of Florida, HCSC (a Blues conglomerate) and Molina each have more than a million individual lives.  As you would expect, the largest states have the most enrollees. California and Florida each have over 2 million persons with individual coverage and Texas has over 1.5 million.

Most companies reported losses on individual business, collectively in the amount of $4.7 billion in 2016.  Only four states had an individual insurance market that was profitable on a cross-plan basis.  HCSC, Human, Aetna, Kaiser and Centene had the largest losses.  (You have to wonder why Centene is expanding its presence.)  The Florida Blues had the largest profits.  Likely because of these financial results, only 141 plans have filed applications to participate in an exchange in 2018, compared to 227 who participated for 2017, an already reduced number from earlier years.   It is pretty clear that the individual exchange market is headed for pretty much complete implosion.  Insurers are generally only participating because they think they can get reinsurance, risk adjustment and other payments from the federal government that will make up for their losses.  They can’t count on that under the current administration.  And of course the real problem in the individual market is the idea that a lot of healthy people should pay very high premiums to support a few very unhealthy and expensive patients, many of whom got there through irresponsible behaviors.  That is not fair or workable.

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