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PPACA loss ratio data: Some insurers set adequate 2014 rates

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Some U.S. health insurers clearly had disappointing results in 2014. 

Some insurers said they were doing fine, and the biggest insurers reported solid 2014 profits.

See also: Mark Farrah: Big health insurers still thriving

The apparently conflicting reports have raised questions about just how well, or how poorly, health insurers did in 2014, especially in the individual health insurance market, which was directly affected by new Patient Protection and Affordable Care Act (PPACA) benefits mandates and underwriting restrictions starting in 2014.

Mark Farrah Associates (MFA) has now published a review of 2014 medical loss ratio (MLR) data that implies that carriers in some states might have done a good job of setting premiums at a high enough level to generate underwriting gains.

PPACA now requires carriers to spend 85 percent of large-group health revenue, and 80 percent of individual and small-group revenue, on health care and quality improvement efforts. Carriers that miss the mark, and earn what the government views as being too big of a profit margin, must send rebates to the enrollees.

Nationwide, the rebate total for all types of health coverage increased 42 percent between 2013 and 2014, to $478 million, according to the MFA analysts.

The size of the average rebate paid increased to $129, from $80.

MFA analysts did not calculate separate totals for the individual, small-group and large-group markets, and they did not try to distinguish between MLRs for grandfathered coverage, fully PPACA-compliant coverage or other types of coverage.

The MFA analysis does not give any information about the percentage of insurers that suffered underwriting losses in 2014, or how those loss totals compare with 2013 underwriting loss totals.

But the analysts did find that seven of the top 10 carriers in the individual market had to pay rebates for their 2014 business. In the small-group and large-group markets, only half of the carriers had to pay rebates.

MFA analysts also published 2013 and 2014 MLR rebate totals for the five states with the biggest increases in rebates and the five with the biggest decreases in rebates. The states with the biggest rebate decreases were Illinois, Louisiana, New York, Tennessee and Utah. The MLR rebate totals there fell to $19 million, from $39 million.

The states with the biggest rebate increases were California, Florida, Michigan, Mississippi and Washington state. The MLR rebate totals there increased to $216 million, from $75 million, suggesting that, by PPACA minimum MLR standards, a number of carriers may have overpriced their 2014 coverage. 

See also:

Regulators wrestle with PPACA 3R’s data lag 

Analysts: 10 states had preliminary 2014 individual MLRs over 100%

CCIIO lets insurers exclude some producer comp from MLR calculations

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