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Harbingers of Change for the Individual Health Insurance Marketplace

 

July 6, 2023

While the individual health insurance market has faced challenges over the years, first quarter 2023 enrollment (1Q23) is nearing levels not seen in almost a decade. According to financial statements filed by insurers, and with estimates by Mark Farrah Associates (MFA), enrollment in individual medical plans, both on and off the exchange, totaled approximately 19.5 million as of March 31, 2023, nearing the height of the market in early 2015. In this brief, MFA provides insights into overall enrollment and financial trends for the individual health insurance segment, while identifying notable market developments in Florida and Texas, the largest individual markets in the US.

 

 

US Health Insurance Individual Market Trends

The individual market has seen many changes in the last fifteen years, including passage of major regulatory reforms with the 2010 signing and 2014 final implementation of the Affordable Care Act (ACA), to the recent public health emergency (PHE) due to the Covid-19 pandemic. Enrollment greatly increased in the early years of the ACA; however, after numerous court challenges, particularly around the individual mandate, enrollment began dropping in 2016, remaining relatively stagnate in the years leading up to Covid-19 and the PHE. Since the end of 2020, individual enrollment has grown each year. According to financial statements filed by insurers, and with estimates by Mark Farrah Associates, enrollment in individual medical plans, both on and off the exchange, totaled approximately 19.5 million, as of March 31, 2023, nearing the market high of 20.4 million enrollees, as of March 31, 2015.

The surge of membership, to the casual observer, may look good for insurers. However, the accompanying growth in medical spending - which by the end of 2015 had greatly outpaced premiums growth - led to segment losses for most health plans. The poor financial results created an exodus of large national carriers from the individual market, triggering premium hikes for those that remained. Overall, the segment has been profitable for health plans since 2017. Since 2021, however, premium growth has, once again, been outpaced by medical expenses, leading to increasing medical loss ratios (MLRs). So far in 1Q23, traditional MLRs are like those experienced during the first quarters in the years leading up to the ACA, with an average aggregated traditional MLR of 79.3%, at premiums per member per month (PMPM) of $528 and claims PMPM of $419. Just as it did in 2015, these increasing MLRs have resulted in market exits this time as well.

 

 

In early 2023, both Bright Health and Friday Health Plans withdrew from individual markets in multiple states. These exits may be harbingers of change for the individual market. Bright Health (founded in 2016) lost over one million members following its decision to withdraw from individual markets nationwide for 1Q23. Friday Health Plan (founded in 2015) and Oscar Health Plans (founded in 2012) also lost significant amounts of enrollees during the quarter, following regional market reductions. Interestingly, the older, established national carriers stepped in to fill the void left by these plans. Centene gained over one million members from December 31, 2022, to March 31, 2023. CVS Health (Aetna) and Cigna also gained significant membership during the period.

Florida and Texas Market Developments

Florida and Texas have the highest number of people enrolled in the individual coverage marketplace, as of March 31, 2023, with 3,992,666 and 3,601,896, respectively. Both states experienced significant changes from December 31, 2022, to March 31, 2023. In Florida, Bright Health’s complete withdrawal from that market left over 262,000 people shopping for new plans for the first quarter of 2023. To a lesser extent, changes Oscar Health made resulted in it losing close to 90,000 people. CVS Health, Centene, and Guidewell Mutual Holding (better known as Florida Blue) all gained more than 100,000 new enrollees during the same time frame.

In Texas, Bright Health and Friday Health plans completely withdrew from the state, leaving a combined 625,000 people to find new coverage. Centene and CVS Health reported the most enrollment gains in Texas, adding 303,771 and 262,068 net new members, respectively. Cigna and Scott & White insurance groups also added more than 100,000 members in the state during the quarter, with Scott & White more than tripling in individual enrollment.

More Changes Ahead

Even with the market changes identified above, the total individual market increased by nearly 1.8 million members, or 10.5%, from 4Q22 to 1Q23. This may be due in part to people, faced with the prospect of losing Medicaid coverage, purchasing an individual plan on their own to gain the benefits of subsidized coverage before the actual end of the PHE.

The end of the federal PHE may mean a significant influx of new members into the individual market due to Medicaid redeterminations, which began in 2Q23. Involuntary loss of coverage is typically considered a qualifying event that triggers a special enrollment period, allowing people to sign up for marketplace and other coverage options. Some states are even adding additional special enrollment periods for people to sign up for individual and family coverage through state-based marketplaces. For the insurance carriers, the potential gains in the individual markets from loss of Medicaid coverage may be offset by losses due to cutbacks in federal funding for subsidized individual/family coverage over the next year. Mark Farrah Associates (MFA) will continue to monitor the changes as they develop and, with MFA’s Health Coverage Portal subscription, so can you.

About U.S. Individual Health Coverage

For this analysis, individual enrollment includes consumers purchasing coverage for themselves and/or family members directly or through marketplace exchanges, not through a government program (such as Medicaid or Medicare) or from an employer or union. Individual enrollment is typically higher in the first quarter of the year, while medical expenses are typically lower, compared to year-end. Data in this analysis is based on statutory financial statements filed with state regulators, the NAIC (National Association of Insurance Commissioners), and the CA DMHC (California Department of Managed Health Care). It is important to note that Mark Farrah Associates (MFA) applied estimated enrollment figures for select carriers not required to report health enrollment on a quarterly basis and made other adjustments based on market analysis. Furthermore, individual enrollment may include Medicaid programs, such as CHIP, as some states include subsidized lines in the individual segment. These factors may have resulted in nominal understatement or overstatement of enrollment.

About Mark Farrah Associates (MFA)

Mark Farrah Associates (MFA) is a leading data aggregator and publisher providing health plan market data and analysis tools for the healthcare industry. Our product portfolio includes Health Coverage Portal™, County Health Coverage™, 5500 Employer Health plus, Medicare Business Online™, Medicare Benefits Analyzer™, and Health Plans USA™. For more information about these products, refer to the informational videos and brochures available under the Our Products section of the website or call 724-338-4100.

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