Standard & Poor’s Global Credit Portal: The U.S. ACA Individual Market Showed Progress In 2016, But Still Needs Time To Mature

The numbers are in. In line with S&P Global Ratings’ forecast, 2016 was a marked improvement for most U.S. Blue Cross Blue Shield (Blues) insurers’ operating performance in the Affordable Care Act (ACA) individual market. But target profitability is still a couple of years away.

Looking forward, we expect insurers, on average, to get close to break-even margins in this segment in 2017. But 2018 and beyond are still uncertain given potential legislative changes to the U.S. health insurance market and the pending legal battles over the cost-sharing reduction (CSR) subsidy. If the market continues unaffected, with a few fixes rather than an overhaul, we expect 2018, or Year 5 of the ACA individual market, to be one of gradual improvement with more insurers reporting positive (albeit low single-digit) margins. But if there are significant changes to the individual market, or if CSRs are made null and void, the market essentially has to restart with a new set of rules.