Based on Blue Cross Blue Shield insurers’ operating performance in the Affordable Care Act (ACA) individual market, analysts for S&P Global Market Intelligence report that most of the insurers did markedly better in 2016 than in 2015 and that, on average, they will approach break-even margins this year.

Target profitability, however, is still a couple of years away and depends on whether significant changes are made to the market.

“As we have stated previously, we expect a five-year path to stability. 2016 was year 3. After starting on the wrong foot in 2014, and deteriorating further in 2015, we are seeing the first signs in 2016 that this market could be manageable for most health insurers,” the analysts wrote.

“If the market continues unaffected, with a few fixes rather than an overhaul, we expect 2018, or year 5 of the ACA individual market, to be one of gradual improvement, with more insurers reporting positive (albeit low single-digit) margins,” they added.

In light of the recently announced exits by several insurers, the analysts said some states could have counties with no insurer on the exchange next year—a problem that could grow worse “if the uncertainty around market rules and [cost-sharing reduction] subsidies isn’t clarified sooner rather than later.” They also noted an observed correlation between states opting not to expand their Medicaid program and low insurer participation on the exchanges.

The analysts anticipate seeing some increase in premium rates next year as insurers continue to adjust their products and pricing, but in the absence of substantial changes to the market, premiums should increase “at a far lower clip than in 2017.”

The individual market is still in the early stage of development, and is thus still “somewhat fragile,” they explained. “Every time something new (and potentially disruptive) is thrown into the works, it impedes the individual market’s path to stability.”

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