Insurers’ profits plummet in 2014 under Obamacare
BUSINESS RECORD STAFF Oct 16, 2015 | 8:46 pm
1 min read time
311 wordsAll Latest News, Health and Wellness, InsuranceNew Patient Protection and Affordable Care Act programs and rules may have cut gross profit ratios at U.S. individual health insurance operations by more than 40 percent in 2014, LifeHealthPro reported.
The average gross operating profit for U.S. individual health insurance operations plunged to 8 percent in 2014, down from 14 percent in 2013. The drop amounted to 43 percent of the 2013 gross profit ratio.
The data, compiled by two analysts at the Urban Institute, is summarized in a set of two papers based on carrier financial data filed with the National Association of Insurance Commissioners.
In 10 states, Affordable Care Act changes helped push preliminary 2014 individual market medical loss ratio (MLR) averages over 100 percent, which means the carriers paid out more in claims than they took in through premiums and incurred losses.
Under the health care law, insurers must keep their medical loss ratios — the percentage of each premium dollar spent on medical claims or quality improvements versus administrative costs — to 80 percent or more for individual policies to avoid financial penalties. For large groups, the MLR requirement is 85 percent or more.
In Iowa, the average MLR was 88 percent, high enough to avoid penalties but well under the 100 percent in which losses would be incurred. Net premiums on a per-member, per-year basis were $3,311 in Iowa, compared with net claims of $2,930 per member per year.
By comparison, health insurers in Massachusetts had a preliminary individual health MLR average of 121 percent. The preliminary averages were over 100 percent and under 120 percent in Montana, Oklahoma, the District of Columbia, New Mexico, Illinois, Minnesota, Oregon, Kansas and Hawaii.
Overall, carriers in the individual market would have had to set premiums 2 percent higher than the actual average in 2014 to have achieved a gross profit margin of 15 percent last year, the analysts estimated.
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