Analysis Highlights Drop in Individual Insurance Market Enrollment, Warns of Further Decline

Following a peak of 17.4 million people enrolled in the individual insurance market in 2015, enrollment has continuously declined. With the elimination of the individual mandate and the expansion of short-term health plans, enrollment will likely continue to drop in 2019.

Enrollment in the individual insurance market has started to decline after a dramatic increase following the roll out of the Affordable Care Act (ACA) in 2014. According to an analysis from the Kaiser Family Foundation, after increasing 64% to 17.4 million people in 2015, enrollment held steady in 2016 and then declined by 12% to 15.2 million in 2017. Enrollment continues to drop in 2018.

However, despite the drops, there were still 14.4 million people enrolled as of the first quarter of 2018, which is up nearly 4 million compared with 2013.

The report attributes the 2015 growth to the full implementation of the ACA in 2014, which guaranteed coverage for people with pre-existing conditions so they could purchase coverage on an open marketplace, as well as provided tax credits for low-income people to help pay for their premiums and reductions in their cost sharing. The report's authors also noted the impact of individual mandate, which penalized those without insurance coverage.

In 2016, while there was no significant change in enrollment, there was a noticeable shift from noncompliant to ACA-compliant plans. During the year, enrollment in noncompliant plans—grandfathered policies purchased before ACA implementation and short-term plans—decreased by 1.3 million (38%), and enrollment in ACA-compliant plans increased by 1 million.

Both compliant and noncompliant plan enrollment began to decrease in 2017, “suggesting that people ending transitional, noncompliant policies were not necessarily moving to the ACA-compliant marketplace,” stated the authors of the report.

Despite enrollment in ACA exchanges remaining stable, enrollment in the total individual market has continued to decline into the second half of 2018. Enrollment declined by 2 million people from the first quarter of 2017 to the first quarter of 2018.

The majority of this dip can be credited to off-exchange enrollment, which dropped by 2.3 million, according to the analysis. At the same time, exchange enrollment increased slightly by 313,000 among subsidized enrollees, reflecting a decrease among those not eligible for subsidies and a larger increase among subsidized enrollees.

Effects of the drop in individual market enrollment can be seen by the significant premium increases in 2017 and 2018, write the authors of the report. “In the early years of the ACA exchanges, insurers underestimated how sick the new risk pool would be and set premiums too low to cover their claims,” the authors wrote. “A number of insurers then exited the market and the remaining insurers raised premiums substantially on average to match their costs.”

They noted that while all signs pointed to the 2017 premium hikes being a one-time correction, premiums increased again in 2018 to compensate for uncertainty around enforcement of the individual mandate and the termination of cost sharing payments.

Looking ahead into next year, the authors warned of the possibility of further declines for the individual market due to the elimination of the individual mandate and the expansion of short-term health plans.