Health Insurance

Health insurers will do better with Obamacare results in 2016 — and even better next year, new projection says

A person walks into the UniVista Insurance company office where people are signing up for health care plans under the Affordable Care Act, also known as Obamacare, in Miami, Florida.
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There could be a light at the end of a dark tunnel for Obamacare insurers.

Health insurers may finally be seeing improved results on their Obamacare plans just as a newly elected president is poised to follow through on promises to end the controversial coverage program, a new report suggests.

An analysis out Thursday says that health insurers are expected in 2016 "to start reversing" financial losses on their Obamacare business after "hitting bottom" in 2015.

And 2017 "will likely see continued improvement" for those insurers selling individual health plans, "with more insurers getting close to breakeven or better," according to the report by Standard & Poor's Global Ratings.

The report also says big price increases for Obamacare plans in 2017 were likely a "one-time pricing correction."

And S&P said that while it expects insurers to ask for premium hikes for 2018, it also believes that "the average level of increase requested will be well below the 2017 hike" of 25 percent for a key type of Obamacare plans.

But "what will happen in 2018 and beyond is somewhat uncertain at this time," the report says.

S&P analysts note that promises by President-elect Donald Trump and Republican congressional leaders to "repeal and replace" the Affordable Care Act with some kind of other health-care legislation "will likely create structural changes to the individual marketplace."

The details and timing of a replacement for Obamacare, and insurers' ability to adapt to changes in the law, "will be key" to how well they do financially from then on, the analysts said.

S&P's report comes at the end of a year that has seen several major U.S. insurers exit Obamacare marketplaces because of steep losses on individual plans, and as major price hikes by many remaining plans are set to take effect next month. Both events have been cited by critics of Obamacare to claim the program is a failure.

On Wednesday, the U.S. Health and Human Services Department revealed that the number of sign-ups for Obamacare plans that take effect in 2017 so far this enrollment season are 400,000, or almost 7 percent, higher on the federal health marketplace than they were at the same time last year. About 6.4 million customers have already signed up for plans on that exchange,, which serves 39 states.

The "enrollment numbers confirm that some of the doomsday predictions about the marketplace are not bearing out," said HHS Secretary Sylvia Burwell on Wednesday. "Some people asked whether customers would sign up ... and today, we know that answer is 'yes.'"

S&P's new report likewise suggests that the worst might be over for insurers who are still selling Obamacare plans.

It notes that the Obamacare individual plan market, as opposed to the much bigger market for group health insurance provided through a job, "has proven a tough nut to crack for U.S. health insurers."

"Most insurers so far have suffered persistent underwriting losses in the ACA individual market," the report said. "2014 was a painful year in terms of profitability, and 2015 only aggravated those losses for most insurers."

"But 2016 is going to be the first year to start reversing the trend," the report said.

"S&P Global Ratings expects U.S. health insurers to report improved underwriting performance in the individual market in 2016 versus 2015," the report said.

"Although most insurers will still report an underwriting loss for 2016, the losses will be smaller than in 2015."

The report attributed the expected improved results to changes in the design of networks of health providers covered by plans, as well as to pricing plan premiums to reflect the costs of providing health benefits to customers. And it pointed to decreases in so-called medical loss ratios by nonprofit Blue Cross and Blue Shield health plans during the past calendar year compared with last year as evidence for that projection.

Medical-loss ratios reflect what share of a plan's premiums is being used to cover the costs of customers' health benefits, as opposed to overhead expenses, including profits.

Analysts said they believed 2017 will see even better results for insurers again as a result of provider network changes and of price hikes, but also because of "stricter rules" about who can enroll in coverage outside of the limited open enrollment season.

"Of course, unanticipated consumer behavior, such as higher-than-priced medical service utilization in response to uncertainty around the future of healthcare could throw a wrench in [the] works," the report said.