Some insurers may still have the patience to give the individual health market another year or two to stabilize.
Deep Banerjee and other analysts at Standard & Poor’s Ratings Services (S&P) give that assessment in a new review of the U.S. individual health market.
Insurers lost about $3 billion on individual health in 2014, and early 2015 numbers suggest that last year’s losses were worse, according to S&P analysts.
Regulators hurt insurers by making changes in Patient Protection and Affordable Care Act (PPACA) rules after products and prices were already locked in. And, on the other hand, insurers hurt themselves by pricing too aggressively, given the lack of information they had about how PPACA would affect claims, the analysts say.
Although margins have taken a hit, “The individual line of business has grown the most during the past two years,” S&P analysts say. In the long run, once insurers know how to price their products properly, the PPACA coverage subsidies and the PPACA ban on most forms of medical underwriting should make the individual health market much more viable than it used to be, they say.
Insurers “find this attractive,” according to the analysts, “not only because of the growth potential, but also because they want to be ready if employers decide to move their employees to a more defined-contribution health insurance system, leading some to the exchanges.”