Business Trends & Strategies, Insurance Industry Reports

Insurers Under Pressure To Improve Margins

A stressed out businessman

A stressed out businessman

After most racked up financial losses on Affordable Care Act plans in 2014, many companies’ results for last year worsened, creating heavy pressure to improve performance this year.

An analysis of filings by not-for-profit Blue Cross and Blue Shield insurers—among the biggest players in the law’s exchanges for buying individual insurance—shows the challenge facing the industry as it seeks a turnaround in the individual business. They paid out more for health care in the first three quarters of 2015 than they took in from on their individual plans.

On Wednesday, Inc. became the latest of the big publicly traded companies to flag problems, saying its losses on individual plans deepened last year. included in its 2015 results $176 million in losses it expects to incur on such plans in 2016.

Though the health law has added customers to many insurers’ rolls, much of that growth has been unprofitable, reflecting medical costs that have often run ahead of what insurers projected when they set , among other factors.

The nonprofit Blues included in the regulatory-filings analysis—which was done by J.P. Morgan—had roughly $20.4 billion in individual-plan premiums over the first three quarters of 2015. Those enrollees incurred about $20.7 billion in medical claims. The result was sharply worse than a year earlier, when the premium total was larger than the claims payout.

Blue Cross and Blue Shield of Louisiana, which estimated it had a loss of $77 million on individual plans for 2015, compared with a $66 million loss in 2014, said the “overall risk of people buying insurance on the exchanges is much higher than planned for,” in part because the law hasn’t attracted enough healthy enrollees. The insurer said such losses “cannot be sustained long-term.”

 

 

Source: Wall Street Journal

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