Financial Performance of Health Insurers: State-Run Versus Federal-Run Exchanges.

Many insurers incurred financial losses in individual markets for health insurance during 2014, the first year of Affordable Care Act mandated changes. This analysis looks at key financial ratios of insurers to compare profitability in 2014 and 2013, identify factors driving financial performance, and contrast the financial performance of health insurers operating in state-run exchanges versus the federal exchange. Overall, the median loss of sampled insurers was -3.9%, no greater than their loss in 2013. Reduced administrative costs offset increases in medical losses. Insurers performed better in states with state-run exchanges than insurers in states using the federal exchange in 2014. Medical loss ratios are the underlying driver more than administrative costs in the difference in performance between states with federal versus state-run exchanges. Policy makers looking to improve the financial performance of the individual market should focus on features that differentiate the markets associated with state-run versus federal exchanges.

Analysis of Actual Versus Projected Medical Claims Under the First Year of ACA-Mandated Coverage.

For the individual market, 2014 was the first year Affordable Care Act medical claims experience data were available to set 2016 rates. Accessing Centers for Medicare and Medicaid Services rate data for 175 state insurers, this study compares projected medical claims with actual medical claims of 2014, as well as the cost and utilization of benefit categories for inpatient, outpatient, professional, and prescription drug spending. Actual costs per member per month (pmpm) were greater than projected in 2014 for inpatient, outpatient, and prescription spending but not for professional care. Overall, actual median medical cost was $443 pmpm, which was significantly higher by $41 than projected cost. Greater utilization of health care was primarily responsible for higher realized medical claims. In terms of the specific benefit categories-inpatient, outpatient, and prescription-actual costs pmpm were significantly higher than projected values. In terms of the drivers of inpatient costs, on an admission basis, higher costs and greater utilization of admissions resulted in higher inpatient costs. For outpatient costs pmpm, higher utilization rather than unit cost per visit drove increased costs. Higher than expected prescription drug costs were driven by both greater utilization and cost per prescription.