The Profitability of Health Insurance Companies

March 15, 2018

Despite significant initial financial losses in the individual market after the key provisions of the Affordable Care Act (ACA) took effect, health insurer profitability in the individual market has risen due to substantial premium increases, government premium tax credits that pay for those premium increases, and the large, government-funded, Medicaid expansion. Since ACA implementation on January 1, 2014, health insurance stocks outperformed the S&P 500 by 106 percent. Insurers remaining in the individual and small group markets seem to have recently accounted for ACA regulations and an older, more costly risk pool than they expected by charging higher premiums that have largely been covered by federal government premium subsidies. Stable year-over-year enrollment, despite large premium increases, suggests a distorted market that involves large transfers from taxpayers to insurers. Large insurers, many of whom left the individual market, are profiting from the Medicaid expansion, which is largely provided through private managed care and paid for by the federal government. All health insurers can expect to become more profitable this coming year due to the recent tax reform.

Spotlight

Health Insurance Innovations Inc (HIIQ)

At HIIQ, every day is an opportunity to make new paths. Our team is on a mission to modernize the insurance landscape as we serve as a technology resource and provide billing services. We provide a cloud-based platform that simplifies the application process, enables licensed agents to provide savvy consumers with convenient access to insurance products and lifestyle benefits, and provides consumers with secure digital access to important insurance information.

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