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Issuers Post Shocking Individual Health Results: Mark Farrah

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Issuers of individual major medical coverage have reported a dramatic improvement in underwriting results for the second quarter of the year.

The issuers’ total medical expense ratio, or ratio of medical claim costs to premium revenue, fell to 77.2% for the quarter, down from 89.2% for the second quarter of 2016, according to new data from Mark Farrah Associates.

The issuers’ individual health revenue increased 8.6%, to $34 billion, and their health care costs fell 6.1%, to $26 billion.

(Related: 3 Effects of a Possible Blues’ Individual Health Recovery)

Mark Farrah analysts also published similar data for employer plans, Medicare Advantage plans and managed Medicaid plans. The individual health policies had the lowest medical expense ratios, and the lowest health care expenses per enrollee per month.

In the fully insured group health market, for example, premium revenue increased 1.1%, year over year, and the medical expense ratio fell slightly, to 81.8%, from 82.3%.

In the Medicare Advantage market, premium revenue increased 7.1%, to $86 billion, but the medical expense ratio rose slightly, to 85.7%, from 85.2%.

The Affordable Care Act now requires health insurers to spend at least 80% of individual major medical revenue on health care and quality improvement activities. Issuers that miss the 80% target are supposed to send rebates to the enrollees.

From 2014 through 2016, disappointing individual major medical results chased many carriers out of the market altogether. Many of the carriers that stuck with the market have appeared to do so mainly as a courtesy to consumers and state regulators, and they have made little effort to market the individual products they still offer.

The new Mark Farrah figures suggest that the service area cutbacks, rate increases, efforts to strengthen applicant screening, and cuts in agent and broker compensation may have led to significant improvements in individual major medical unit results.

If issuers keep their overall individual medical loss ratio under 80% for the entire year, they could end up having to send Affordable Care Act medical loss ratio rebates to a significant number of policyholders.

Mark Farrah, a health insurance market data firm based in McMurray, Pennsylvania, bases its health insurer performance results on the financial statements the issuers send to the National Association of Insurance Commissioners.

The analysts have access to reports for about 80% of the health insurance market. The database the firm uses excludes some California health maintenance organizations that do not file the NAIC’s Supplemental Health Care Exhibit (SHCE), and some insurers that use the NAIC’s life, accident and health, or property-casualty reporting forms and do not send in SHCE data for their major medical operations.

Mark Farrah has posted its report on second-quarter health insurance issuer results here

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