A.M. Best Special Report: Number of Insurers Meeting Affordable Care Act Medical Loss Ratio Requirements Increasing

OLDWICK, N.J.--(BUSINESS WIRE)-- The health industry has stood strong and most companies have been successful in managing through the implementation and execution of strategies designed for the new Patient Protection and Affordable Care Act (ACA) landscape, according to a new special report by A.M. Best.

The Best’s Special Report, titled, “Health Care Quality Improvement Expenses Generally Steady, Number of Insurers Meeting Affordable Care Act Medical Loss Ratio Requirements Increasing,” states that as insurers have had more time to adapt to the new ACA environment, they have more frequently been meeting the minimum loss ratio (MLR) requirements with every passing year. The large group market has been the most stable, with an average of 56.4% of insurers by state meeting the 85% requirement in 2011 and steadily increasing to 63.5% of insurers in 2014. The small group market reported slightly worse results as states have averaged 63.4% of insurers meeting the 80% MLR requirement in 2014, steadily increasing from 50.6% in 2011. The individual market has performed the most poorly, as states averaged only 44.8% of insurers meeting the MLR requirement in 2011.

There has been increased collaboration between providers, health plans and government, as well as renewed interest by providers of all sizes in creating, acquiring health plan capabilities or better aligning with carriers. This collaboration is partly the result of the ACA forcing a change, such as implementing the MLR requirements. The competitive pressures from consolidation in the marketplace have also been a driving force of this transformation.

Overall, insurers’ expenses related to health care quality improvement accounted for 7.7% of total expenses among insurers that filed the Supplemental Health Care Exhibit in 2014. For this calculation, expenses include total claims adjustment expenses, improving health care quality expenses, and total general and administrative expenses. The allocation to health care improvement expenses has declined for the total filing population in each of the past two years after peaking at 8.5% in 2012.

Nevertheless, health care spending in the United States exceeds that in other countries, despite a global slowdown in spending growth in recent years. Even public spending on health care on a per capita basis is higher in the United States than in most other countries with universal health care. High health care spending has broad consequences for the U.S. economy, contributing to personal bankruptcy, budget deficits and the creating of competitive disadvantage relative to other nations.

A.M. Best will be monitoring companies as they adapt to changes in an industry that is slowly moving towards a more preventative and health-conscious landscape.

For the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=243691.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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A.M. Best Company, Inc.

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Source: A.M. Best Company, Inc.