In highlights from the First Monday series, A.M. Best Assistant Vice President Joseph Zazzera and Senior Financial Analyst Bridget Maehr discuss how health insurance carriers are navigating health reform provisions that began in 2014, and the sector’s “stable” outlook.

More than 11 million people have selected health plans through the Affordable Care Act (ACA) in 2015, 3.1million more than in 2014. In 2014, 8 million initially enrolled, but through the rest of the year only 6.7 million were enrolled. Mr. Zazzera says this was lower than expected and had a negative impact on insurers who had to price products prior to the ACA rollout.

According to Mr. Zazzera, “There has been a general decline… in the small group market…more so from the switch from HMO to PPO, (and) from fully insured to ASO type arrangements…The individual segment has increased very noticeably.“ Ms. Maehr, noted that individual enrollment was very cumbersome and insurers were forced to upgrade technology, change workflows and…increase administrative expenses.

Carriers are interested in offering Medicare Advantage, according to Ms. Maeher, but they are being selective…looking for areas that offer more volume and an advantage with their provider relations. So far, 28 states and the District of Columbia are expanding their Medicaid programs.

There is a shift in healthcare from employer to employee, and insurers are picking up on this trend. Mr. Zazzera says insurers “see a lot of opportunity to offer products to this customer base.”

Ms. Maehr says “the health industry’s financials were very solid throughout the third quarter of 2014 (including) top line premium growth. In addition, medical cost trends have remained moderate, even with the additional utilization from the exchange membership.” The sector has seen narrowed margins, and that lower overall margins will likely be the new normal.

We’d like to thank A.M. Best for their contribution to our program.  If you’d like to see more of the First Monday Series, visit the A.M. Best website.

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