Companies seem to have enjoyed excellent financial during 
the Act’s first year implementation, despite being forbidden by the law to turn down individuals with pre-existing medical conditions or charge them higher premiums.
According to a study by the Kaiser Family Foundation, a key company profitability known as the “medical loss ratio” will range from 81% to 87% for policies for 2014 when all the figures (which are reported to state regulators) are available.
The loss ratio is calculated as claims divided by premiums adjusted for taxes and fees, and is a widely-accepted measure financial performance, Kaiser notes.
The loss ratio in the market began climbing following passage the , from 80% in 2010 to 85% in 2013, the year before the new market rules and subsidies took effect.
The requires that insurers maintain a loss ratio at least 80%. That means they must pay out 80% income in policyholder claims, keeping no more than 20% for administrative expenses, overhead and profit.
Final profitability figures for 2014 will depend the amount reinsurance payments insurers receive under the . That will not be known until the end June. Insurers submit requests for reinsurance payments to the federal government based expenses for – patients.
The total amount reinsurance fees is projected to be $9.7 billion. In to state commissioners, insurers say they expect to receive $5.5 billion in reinsurance payments. (This does not include data from insurers in California, which file separate reports.)
If insurers receive the $9.7 billion, their loss ratio will fall to about 81%, Kaiser estimates. The -end estimate 87% assumes the companies will get only the $5.5 billion they estimated in their reports to the states.
The financial performance insurers in the market will be closely watched by regulators, who are currently reviewing proposed premiums for 2016, Kaiser noted. This is the first insurers can project premiums based a year claims experience under the .
The 2014 results suggest that premiums in the market may rise slightly, “but the effect is not likely to be dramatic across the market overall,” Kaiser believes.
Some insurers experienced unexpectedly claims, but others saw lower claims than anticipated. In addition, pent-up demand for by people who were formerly may have caused a spike in claims during 2014 that will probably not be repeated in future years.
Other pressures pushing premiums higher in 2016 include a general upward trend in costs, especially for . In addition, the government’s reinsurance is scheduled to taper down from $10 billion in 2014 to $4 billion in 2016.
Factors that may hold premiums down in coming years include competition among insurers, as well as an influx healthier enrollees as rise under the mandate and so-called “grandfathered” operating under transitional rules phase out, Kaiser noted.
