Obamacare premium hikes called ‘one-time’ fix
NEW YORK (CNNMoney) — Obamacare is not in a death spiral. In fact, insurers’ prospects in the individual market are looking brighter, according to a new S&P Global Ratings analysis.
Insurers have started closing the kind of eye-popping losses that prompted them to hike premiums for the Obamacare benchmark plans an average of 25% for 2017. S&P expects rate requests for 2018 will be “well below” that level.
“We view 2017 as a one-time pricing correction,” the report found.
S&P did not take into account the impact of President-elect Donald Trump’s vow to repeal Obamacare next month. What happens in 2018 and beyond will depend on how and when Trump and congressional Republicans replace the health reform law, S&P said.
The individual market — both on and off the Obamacare exchanges — has proved challenging for the insurance industry. Many insurers initially underestimated how sick enrollees would be, leading them to price their plans too low. The industry suffered $3 billion in losses in this market in 2014 and another $4.5 billion last year, promoting some insurers to scale back or exit the sector.
To address this, insurers raised their rates for 2016, limited their networks of doctors and hospitals to lower-cost providers and boosted the use of HMOs, which employ primary care providers to manage patients’ medical needs more closely. Also, the Obama administration tightened the rules for signing up for policies outside of open enrollment after insurers complained that lax enforcement allowed people to join only when they became sick.
S&P expects 2016 losses will come in at less than $3 billion. And insurers will be closer to break-even in 2017, with more reporting profits in the individual market segment.
“We are getting the first signs that this can be a viable market for insurance companies,” said Deep Banerjee, a director at S&P Global Ratings.