After attending multiple broker advisory meetings, on the individual and small group markets we now have view of the health insurance markets.

Individual health insurance on and off the exchange:

This market is completely unstable! The insurance companies have had a difficult time adjusting to the new rules, regulations and managing the risk. 

The first issue is open enrollment, the insurance companies were never set up to take on this type of volume in such a short time period.   This has led to significant strain on systems and personnel.

The next issue is the federal market place inabilities to operate as intended.  There communications with the carriers has created more administration work.  Here is an example, when someone switches plans with in the same carrier, the government would send one communication canceling coverage and one communication electing new coverage.  The problem is they do not send the info in order, which lead to someone losing coverage who was not supposed to.

Risk = Loss

The insurance carrier have taken on a lot of risk both on and off the exchange. This risk has turned into large losses for the carriers.  The first 2 years of the ACA, only the sick people enrolled in plans.  The government promised larger enrollments to offset that risk and that has not happened yet.  Some carriers have had huge losses to the point that they are considering pulling out of the market.

Special Enrollment Periods= Loss

Under the ACA, a qualifying life event creates an enrollment period where you can enroll into a plan. It has turned out that this business is high losses for the carriers. So high the insurance companies investigated the data.  One-third of their enrollments were coming from SEP’s and half of their overall claims came from this block. The marketplace is not enforcing the SEP rules of documentation to prove the event.  This has led to people gaming the systems which creates losses for the carriers.

Where do we stand?

The individual market is completely unstable and there is no clear picture for 2017.  Carriers may ask for large rate increases, if the government does not grant those rates increases, then they could withdraw from the market.  This would be the nuclear options for an insurance company but it could very well happen.  In May, all of the health insurance companies will file for 2017. At that point we will know where the market stands.