What’s driving insurance industry growth?
By Sarah DingleThe insurance industry continues to grow.
It grew at an annual rate of about 1.7% last year, according to a new report from the Center for American Progress.
The average growth rate since 2007 was about 0.4%.
But that’s just the rate of growth, according the Center.
The industry added a lot of jobs.
And there’s a lot more to be done.
Here’s how to understand the industry’s growing importance:Health insurance has been a huge industry for the last decade, as millions of Americans have lost their jobs due to the Affordable Care Act.
The ACA’s healthcare law expanded coverage and made insurance more affordable.
In 2014, the Centers for Medicare and Medicaid Services estimated that 2.3 million people lost their job because of the law.
But those losses weren’t enough to cause a complete shutdown of the insurance market.
For the first time, the federal government set up the exchanges to help people purchase insurance on the private market.
Now that the markets are open, companies can offer policies on the exchanges, which are also designed to be affordable for low-income and middle-income Americans.
There’s been some progress: In the first quarter of 2018, the average premium on a benchmark plan dropped to $4,939, compared with $7,946 a year ago, according a report from Avalere Health.
But the number of people covered by those policies has still not surpassed 1 million, according an Avalere report released in April.
Meanwhile, the insurance companies are continuing to push their policies out to consumers, who are increasingly turning to the insurance exchanges as they become less profitable.
“It’s been a tough road, and it’s not over yet,” said Tom Smith, chief executive of Avalere, in a statement.
“But we’re seeing companies and their executives making more choices, including lowering premiums for older, sicker consumers and offering new options for younger people.”
What’s driving the insurance growth?
The growth in the industry has been driven by three main drivers: 1) The federal government, which has provided millions of dollars in grants to help insurers create the healthcare exchanges; 2) the rising cost of insurance coverage; and 3) the growing number of new insurers joining the industry.
The federal subsidies that the Affordable Health Care Act provides insurers for plans purchased through the exchanges are one of the drivers for the growth, said Matthew Kuehn, a senior economist at the Kaiser Family Foundation.
Insurers can apply for tax credits to help them pay for their premiums.
The government also offers rebates for insurers who don’t offer plans through the exchange.
In 2018, more than 7 million people received federal subsidies to buy insurance on exchanges, according that Kaiser report.
The total number of Americans with tax credits for health insurance in 2018 was about 1 million.
That’s up from the 1.6 million Americans who received tax credits in 2018, according Avalere.
But as more Americans use the healthcare exchange, they’re also buying more policies.
About 10% of those who bought health insurance through the healthcare marketplace in 2018 had a policy in 2018 that was not sold through the ACA exchanges, said Mark Zandi, an economist at Moody’s Analytics.
That trend is expected to continue in 2019, Zandi said.
And the number and size of the health insurance policies sold through private insurance markets is expected more than double next year, he said.
But the biggest drivers of the growth in health insurance are the rising costs of insurance, and the increasing number of companies offering plans through those plans.
The premiums for plans sold through plans offered through the private exchanges are expected to be lower than those of plans sold on the exchange, and insurers will have to raise prices, which will increase demand for their policies.
Insurer companies are also shifting their focus from paying out profits to helping people with their medical expenses, said Zandi.
“That will drive the premium increase,” he said in an interview with Bloomberg News.
Health insurers are also pushing to reduce the amount of money they have to spend on medical care, particularly in the states where the markets have been operating, he added.
The Federal Emergency Management Agency, for example, has been spending more money on medical services than it has on other things.
Insurers are also increasing their marketing efforts, which can include advertising and promoting their policies online.
And insurers are lobbying Congress to keep the tax credit for people with pre-existing conditions, which allows insurers to sell policies with less coverage.
For now, insurers continue to focus on getting new insurance plans to consumers.
“If you want a good, affordable plan, you’re going to have to get one of these plans,” said Smith.