With the Affordable Care Act’s future on hold, insurers are exceeding profit expectations. In addition to withdrawing from ACA exchanges, they’re leveraging other tools at their disposal to improve performance in uncertain times.
Seemingly unaffected by debates about the Affordable Care Act, major health insurers' stocks rose an astonishing 26% in Q2. After losing billions of dollars as ACA providers, these insurers are seeing dramatic gains as they withdraw from ACA exchanges, raise premiums, restrict provider networks, and concentrate on selling employer-provided coverage. Despite these developments, there are signs that major insurers are still willing to work with the ACA.
Of the six major health insurers in the S&P 500, four have begun withdrawing from ACA exchanges. Following HC and Humana, Aetna announced earlier this year its withdrawal from 70% of the counties it currently serves, while Anthem will leave Ohio in 2018.
Insurers withdrew from ACA exchanges because of severe losses in commercial lines of business that depend on the ACA. According to Doniella Pliss, associate director at insurance reporting agency A.M. Best, insurers claimed underwriting losses of $2.1 billion in 2015 alone, with claims from ACA policyholders accounting for most of these losses. Pliss also noted that losses remained as high as $893 million last year.
Insurer Success with the ACA
Not all insurers have struggled to succeed with the ACA. Centene Corp, the smallest of the S&P 500 managed care providers, posted 47% in gains last year, the highest rate among the major insurers. Unlike its competitors, it’s expanding its ACA coverage in 2018, joining exchanges in Kansas, Missouri, and Nevada and expanding coverage in markets left by UHC, Aetna, and Anthem. By closely managing participants and serving a high percentage of subsidized membership, it’s largely succeeded where competitors have failed.
Because of its focus on employer-provided insurance, Cigna has also remained profitable. Like Centene, it’s also leveraging subsidized markets like the private Medicare Advantage Program, with enrollment in MA programs expanding by 6% between 2016 and 2017. Cigna’s pursuit of overseas markets has further benefited its bottom line.
Rates and Restrictions
In addition to reducing ACA expenses, most large insurers have stayed profitable in other lines of business. According to Pliss, insurers primarily increased profits “by increasing rates, restricting provider networks, and changing benefits packages.” She also said that “some insurers are reining in costs by restricting out-of-network access and monitoring patients more closely.”
Continuing doubts about the future of the ACA suggest that large insurers will continue to abandon exchanges around the country in order to realize their ambitious earnings projections. In an effort to prevent patients from losing access to healthcare, the government has withdrawn access to profitable Medicaid-subsidized patients as an incentive to stay in the exchanges.
Some reports suggest that the ACA exchange market could be stabilizing. Although the Centers for Medicare and Medicaid Services report a 38% drop in applications from insurers to participate in the exchanges in 2018, the Kaiser Family Foundation reports that participating insurers have reported improved financials.