This Politico article got my attention: Obamacare insurers had their best year ever in 2017 and actually made money. The analysis is based on 29 BCBS plans, which are often the biggest insurer in a given market. Two reasons for their profitability were last year’s large premium increases – which averaged over 25% for this group -- and less competition in each market.
While this might seem like good news, it’s important to remember that one profitable year won’t be enough to make insurers forget the billions in losses over the last three years. While it might seem as if the population has stabilized and become more predictable, it really hasn’t. One of my favorite actuaries used to always say, “cost is cost; price is policy”. You can’t predict future cost using one year of claims. But you can price to protect against the risk – which is what insurers did in 2017.
The timing of this news probably didn’t help as some lawmakers unsuccessfully tried to add a stabilization package to the omnibus spending bill set to become law that would provide additional support for costly claims incurred by the very sick and restore cost-sharing subsidies. Why step in to help when the insurance companies are making money?
The focus needs to be on the bottom line. While the government may have escaped paying cost-sharing subsidies, it’s paying much higher premium subsidies. People eligible for a subsidy pay a monthly amount based on their income and the government pays the rest. When insurance companies raise rates, the bottom line is a bigger bill for the government.
Beyond this funding issue, the repeal of the individual mandate, over time, will take people out of the market, making it less stable. When you add in other market forces, such as more high-cost claims and bigger bills for specialty drugs, the future does not look bright.
We all have an interest in creating a stable individual market — for start-up businesses, early retirees, options to COBRA when between jobs. We need to get this right. Congress needs to act.