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Despite various actions by the Trump Administration to undermine the Affordable Care Act, nearly 11.8 million people ended up enrolled in coverage through the ACA’s health insurance exchanges for 2018, down only slightly from the 12.2 million who enrolled in 2017. Before accounting for tax credits, the average monthly premium across all consumers is $621, up 30.5% from $476 in 2017. This climate has been a positive for many of the nation’s health insurers (particularly the larger health plans) whose profits have been buoyed by several key factors: individual market premium increases, government-funded tax credits, state Medicaid expansion, and surging Medicare Part C (Medcare Advantage) enrollment.

When Congress passed the Affordable Care Act in 2010 it helped offset the cost by cutting payments to Medicare Advantage plans, offered by private insurers operating under contract with the government. Insurers and Republicans said the cuts — about $150 billion over 10 years — would “gut” the program, a major theme in the 2010 and 2012 elections. The Congressional Budget Office predicted that enrollment would fall about 30 percent
In fact, more than 19 million people are enrolled in such plans this year, up from under 11 million in 2010. About one-third (33%) of Medicare beneficiaries have chosen private plans, offered by insurers like Humana and UnitedHealth Group, over the traditional fee-for-service Medicare program. In total, 2,317 Medicare Advantage plans are available nationwide for individual enrollment in 2018 – the largest number of plans available since 2009.

Overall, insurers’ stock prices rose 272% from Jan 1, 2014 through Jan 1, 2018, outperforming the S&P 500 index by 106% according to a recent White House Council of Economic Advisors’ report. Moreover, the lower federal tax rates now in effect will also make the insurers more profitable going forward. The report noted that while some insurers, including United Health and Humana, have exited the individual and small group markets, the plans that remain have raised premiums to account for older, sicker patients and ACA regulations. Those premium increases have been covered by federal premium subsidies, which now go to about 85% of exchange enrollees.

Ironically, many health care experts have said that, despite the Trump Administrations’s efforts to undercut the ACA exchanges, the exchanges are actually becoming more stable with each passing year (at least in certain geographical areas). We even see some insurers, such as Centene Corp and Oscar Health, actually expanding their footprints in the individual markets. Moreover, the White House report notes that many regional Blue Cross and Blue Shield plans are turning a profit or approaching profitability. One example is Highmark Health (a Blues-affiliated plan in Pittsburgh) which said earlier this year that it recorded a profit on the ACA individual market for the first time in 2017.

Not surprisingly, what the White House report didn’t mention was the Trump Administration’s continued efforts to undermine the ACA, such as cutting back the open enrollment period to 45 days slashing funding for outreach and advertising, and most importantly, ending the cost-sharing reduction payments the help reduce the out-of-pocket costs for low income enrollees. Health insurers last year cited the absence of cost0sharing subsidies and the continuing uncertainty in the future of the individual market as major reasons they hiked premiums by more than 30% on average according to several analyses.

Looking ahead t0 2019, it is expected that the ACA individual market to be further destabilized via implementation of a series of CMS rules allowing for the expansion of high-deductible, short-term and association health plans and providing states greater flexibility in determining the menu of essential health benefits plus eliminating the ACA individual mandate penalty.

With the White House and Congress now unlikely to implement policies or pass legislation this year to lower 2019 premiums, such as cost-sharing reduction payments or a reinsurance pool for high-risk consumers, it will be up to individual states to bolster their markets and this will result in widely varying outcomes in red vs. blue states. This generally is expected to raise ACA premiums again in 2019, with the Congressional Budget Office now projecting that premiums for the most popular silver plans on the ACA exchanges will jump an average of 34% in 2019. TheUrban Institute estimated that by eliminating the individual mandate penalty starting next year along with expanding short-term plans, would increase individual premiums 18.2% on average in states that don’t restrict short-term plans. That’s because by eliminating the mandate and allowing the proliferation of cheaper, skinnier plans is likely to take people away from the individual market, leaving behind the heavily subsidized and the sickest enrollees.

Right now Massachusetts is the only state that requires residents to enroll in health insurance but New Jersey just passed an individual mandate law taking effect in 2019 which will require all of its citizens to either pay for coverage or pay a , And, there are at least 9 other states that are considering a mandate to promote continuous coverage, including CA, CT, HI, RI, WA, MD, MN, VT, and DC. Moreover, some states are also considering restricting the sale of short-term insurance plans with MA, NJ and NY effectively banning short-term insurance plans by requiring extensive consumer protections. Other states, such as CO and OR limit the plans’ duration to 3 months while still other states including CO, MD and WI are looking to set up reinsurance funds to help subsidize high-cost patients. Meantime, other states including AK, MN and OR have already received Sec. 1332 waivers to establish reinsurance programs to bring down premiums of high-cost patients. At the other end of the spectrum, some states like IOWA and Idaho, are moving to sidestep ACA coverage rules by expanding plan choices on their exchanges.

The outlook for 2019 at the state level is a patchwork of changes to the ACA that will result in a hodgepodge of insurance laws and regulations across the 50 state landscape. The bottom line: even though the ACA was intended to create more uniform coverage and regulations nationwide,, we’re now moving on the exact opposite direction. And there are direct consequences to health insurers which can expect a patchwork of state laws and regulations to add to their administrative and cost burden.

Depending on the outcome of several state legislative initiatives and key governor’s races this November, look for Medicaid expansion in several states such as what just recently occurred in Virginia (400K eligible to be added to the rolls in 2019 with work requirements) — VA became the 33rd state (plus DC) to approve Medicaid expansion. Maine was the first state to approve an expansion of Medicaid through a ballot initiative to, and organizers are working on ballot initiatives in Utah, Idaho and Nebraska as well.

When the increase in the number of states expanding Medicaid under the ACA is combined with continuing growth next year of Medicare Advantage Part C enrollment, plus the expected premium increases expected in the individual plan market and finally the growth of newly allowed short-term insurance plan market (high deductible, skippy coverage plans), the 2019 financial outlook remains positive for the health insurance industry — I expect to see profit margins in the mid to high teens or higher for the biggest plans, somewhat lower for smallest insurers. The one variable is the velocity of changes approved at the state level in 2019 which could impose additional administrative burdens and higher costs on health insurers