Segment 4 – Healthcare Costs

Segment 4 – Healthcare Costs

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This segment reviews the relentless growth of healthcare spending in the U.S.

In Segments 2 & 3, we looked at the history of medical care in the U.S. and the birth of employer-based health insurance, along with landmark enactment Medicare and Medicaid. We looked at failed healthcare reform initiatives. This history tells us how we got today’s remarkable advances in medical technology but lackluster health system performance overall.

In Segment 4, we will zero in on the perennial problem of rising costs. We will look at how healthcare costs have grown over time and how we compare to other countries.

Then in Segment 5 & 6, we will ask, why is healthcare so expensive in the US, and is it worth the money? And we will talk about the effects of exorbitant healthcare costs on politics, economy, society and even our future success as a nation.

I call healthcare costs the Real Problem.

Let’s start with a startling fact. Between 1999 and 2009 Americans’ productivity grew by 30%. According to a Rand study, average Americans’ total monthly compensation grew from $6,350 dollars to $8,260 dollars. But all this increase went into healthcarepremiums (shown in red), not into their paychecks (shown in blue).

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Even though employers paid out more for the average American family, we felt no richer. The culprit was the health system.

Here are some more statistics that show the extent of the cost problem.

The first graph compares healthcare inflation (red bars) with general inflation (blue bars). Health care consistently outpaced general inflation, some times by a lot such as 2007, 2009 and 2015.

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The next graph shows growth in healthcare spending as a percent of total gross domestic product. This graph goes up to 2014 at 17.4% of GDP. The figure for 2015 was 18%, for a total of 3.2 trillion dollars. This is one-sixth of the entire US economy, directly employing one of every 9 workers, according to NY Times.

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Let’s compare the US with other countries. This first graph shows that in developed countries, health spending goes up as income goes up, until income reaches $100,000 and then levels off. Except in the US, where we spend an inordinate amount on healthcare.

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Here are the totals for developed countries – blue for public spending and red for private. US is on the left, head and shoulders above the rest.

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So, what are the repercussions of all this healthcare spending?

We already talked about its effect on paychecks. Healthcare also adds to the cost of goods; for example GM says that healthcare adds 1500 to 2000 dollars to the cost of every automobile in the showroom. This affects both the consumer but also corporate bottom lines. It is also affecting budgets of state and local governments, including pension fund health costs.

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Health costs have also taken an increasing chunk of federal spending, growing from around 7% after Medicare was passed in 1965 to almost 29% now of the entire federal budget. It competes with defense, education, and infrastructure.

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Why are costs so high? And why so much more in the US than in other countries? The answer is a perfect storm of bad reasons.

We will cover these in Segment 5. I’ll see you then.

 

 

Health Insurance Premiums Are Stabilizing

http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2018/08/16/health-insurance-premiums-are-stabilizing-despite-gop-attacks

Stateline Aug16

 

Despite Republican efforts to undermine the Affordable Care Act, insurance premiums will go up only slightly in most states where carriers have submitted proposed prices for next year. And insurance carriers are entering markets rather than fleeing them.

The improvements stem from less political uncertainty over health policy, steeper than necessary increases this year, better understanding of the markets, improvements in care and a host of actions taken by individual states.

Average proposed premiums for all levels of plans in California, Colorado, Delaware, Florida, Indiana, Nevada, Ohio and Pennsylvania will increase less than 9 percent in 2019, according to the Kaiser Family Foundation.

By contrast, this year’s mid-priced plans increased an average of 37 percent nationally compared to 2017.

In some states, 2019 premiums are projected to decrease. Prices also are expected to drop for people in a number of metropolitan areas, including Atlanta, Baltimore, Denver, New York and Washington, D.C.

And unless the Trump administration launches new attacks on the Affordable Care Act in the coming months, analysts believe the average increase across the United States will hold to the single digits.

To be sure, not all areas will fare as well. Some can still expect to see big increases next year, according to the Kaiser Family Foundation. For instance, proposed premium increases in Maryland average 30 percent for 2019.

(In some states, carriers have not yet had to file their rate proposals for 2019, but will in the coming weeks.)

But after a couple years in which carriers fled many markets around the country, insurers are planning to enter exchanges in many states, including Arizona, Florida, Michigan, New Mexico and Wisconsin. In some states, existing insurers are pushing into new areas.

“That they are entering markets is a sign that the insurers are pretty confident about those markets,” said Rabah Kamal, who analyzes health reform and health insurance for Kaiser.

“After several years of big losses, insurers are actually turning a profit,” said Kamal. “They’re doing well, so overall, there’s no justification for big increases.”

To a large extent, premiums in 2019 appear to be moderating because carriers raised rates higher than necessary in 2018 in reaction to the uncertainty over how Congress and the Trump administration might undermine the ACA. “It boils down to the fact that last year’s rates were too high,” said Emily Curran, a research fellow at Georgetown University’s Health Policy Institute.

Carriers also understand the marketplace much better than they did in 2014 when the exchanges were launched across the country, Curran and others say. Carriers have a better sense of who they are covering and how to predict their health risks, Curran said. Insurers and medical providers also have better coordinated care to reduce duplication.

State Roles

States also have had a major hand in stabilizing their markets, seeking to limit the damage the federal government is doing to the ACA.

Massachusetts had its own individual mandate before the ACA, and now New Jersey does as well. Three states, Massachusetts, New Jersey and New York, have passed outright bans on issuing short-term health insurance policies, while 12 others have adopted standards more restrictive than federal policy. Some states, including Alaska, Minnesota and Oregon, have also created state-funded reinsurance pools, which protect carriers from financially crippling individual medical claims.

Finally, a number of states have done their own outreach to publicize their exchanges and promote enrollment in the absence of federal efforts.

Pennsylvania is one of those states. The insurance market has stabilized there, said Jessica Altman, the state’s insurance commissioner. She projects the average state premium increase in 2019 will amount to 0.7 percent, compared to 30.6 percent this year. She said in 31 of 67 Pennsylvania counties, there will be more carriers selling policies next year compared to 2018. And, she said, many carriers are pushing into new territories.

Her agency estimates that the increase this year would have been only 7.6 percent absent the federal government’s elimination of cost-sharing reductions, which were federal payments to insurance carriers to cushion them from exorbitant individual medical claims.

“We had pretty significant increases last year, and we shouldn’t have,” Altman said.

Julie Mix McPeak, commissioner of the Department of Commerce and Insurance in Tennessee, where premiums are expected to fall and more carriers are intending to operate, said the ACA brought more than 200,000 Tennesseans into health plans — many of whom previously had not sought routine health care — which meant higher claims in the first years.

“We had a pretty negative health score in terms of dollars spent on claims because so many people coming into primary care had health issues that needed to be addressed. Now that they’ve been in care for several years now, we aren’t seeing those claims rising any more. They are leveling off.”

Whether the stability that appears to be settling the markets in 2019 will continue beyond that largely depends on what Washington does. “No one,” said Curran, “wants to see more uncertainty.”

Undermining the ACA

A Brookings Institution study released this month estimated that insurers on the health insurance market this year will enjoy an underwriting profit margin of 10.5 percent, up from 1.2 percent last year.

The study estimated that, absent federal policies disrupting the marketplaces, premiums would have dropped 4.3 percent nationwide in 2019.

Many health care analysts agree. “In cases where we are seeing modest increases, we might have seen decreases,” said Myra Simon, executive director of individual market policy for America’s Health Insurance Plans, a lobbying arm of the health insurance industry.

Steps taken by Republicans in Washington to undermine the exchanges include Congress’ repeal starting next year of the individual mandate, which requires all Americans to obtain health insurance, and the Trump administration’s decision to end the Obama-era cost-sharing reduction payments.

The administration also eliminated most funds for outreach to encourage enrollment in the markets and shortened the periods during which people could sign up for plans. In addition, the administration has moved forward with plans to loosen regulation on association and short-term health plans that don’t have to be as comprehensive as plans sold under the Affordable Care Act.

Health insurance analysts of all stripes had said those actions would draw people away from the insurance exchanges, particularly the young and healthy. Their departure, analysts said, could drive up premiums for all those remaining and set the markets on a “death spiral” that would ultimately drive all carriers from the exchanges.

The president has been clear about his intentions. “Essentially, we are getting rid of Obamacare,” he said in April.

But as carriers file their plans with state insurance offices for next year, it appears that warnings of imminent catastrophe were, at the least, premature.

“The administration has done almost everything on its list to destabilize the market or, in their words, ‘create more choice,’” said Chris Sloan, a director at Avalere Health, a Washington-based health policy research and consulting firm. “They’ve done it all and the market is still standing.”

 

 

 

California’s ACA Rates To Rise 8.7% Next Year

California’s ACA Rates To Rise 8.7% Next Year

Premiums in California’s health insurance exchange will rise by an average of 8.7 percent next year, marking a return to more modest increases despite ongoing threats to the Affordable Care Act.

The state marketplace, Covered California, said the rate increase for 2019 would have been closer to 5 percent if the federal penalty for going without health coverage had not been repealed in last year’s Republican tax bill.

The average increase in California is smaller than the double-digit hikes expected around the nation, due largely to a healthier mix of enrollees and more competition in its marketplace. Still, health insurance prices keep growing faster than wages and general inflation as a result of rising medical costs overall, squeezing many middle-class families who are struggling to pay their household bills.

The 8.7 percent increase in California ends two consecutive years of double-digit rate increases for the state marketplace.

“It’s not great that health care costs are still increasing that much, but the individual market is not sticking out like a sore thumb like it has in other years,” said Kathy Hempstead, senior adviser at the Robert Wood Johnson Foundation. “It’s falling back to earth.”

The future may be less bright. An estimated 262,000 Californians, or about 10 percent of individual policyholders in and outside the exchange, are expected to drop their coverage next year because the ACA fines were eliminated, according to the state. Peter Lee, executive director of Covered California, warned that the exodus of healthier consumers will drive up insurance costs beyond 2019 — not just for individual policyholders but for California employers and their workers.

“We are paying, in essence, a surcharge for federal policies that are making coverage more expensive than it should be,” Lee said in an interview. “There will be more of the uninsured and more uncompensated costs passed along to all of us.”

Critics of the Affordable Care Act say it has failed to contain medical costs and left consumers and taxpayers with heavy tabs . Nearly 90 percent of Covered California’s 1.4 million enrollees qualify for federal subsidies to help them afford coverage.

Foiled in its attempt to repeal Obamacare outright, the Trump administration has taken to rolling back key parts of the law and has slashed federal marketing dollars intended to boost enrollment. Instead, the administration backs cheaper alternatives, such as short-term coverage or association health plans, which don’t comply fully with ACA rules and tend to offer skimpier benefits with fewer consumer protections.

Taken together, those moves are likely to draw healthier, less expensive customers out of the ACA exchanges and leave sicker ones behind.

Nationally, 2019 premiums for silver plans — the second-cheapest and most popular plans offered — are expected to jump by 15 percent, on average, according to an analysis of 10 states and the District of Columbia by the Avalere consulting firm. Prices vary widely across the country, however. Decreases are expected in Minnesota while insurers in Maryland are seeking 30 percent increases.

In California, exchange officials emphasized, consumers who shop around could pay the same rate as this year, or even a little less.

Christy McConville of Arcadia already spends about $1,800 a month on a Blue Shield plan for her family of four, opting for “platinum” coverage, the most expensive type. Her family doesn’t qualify for federal subsidies in Covered California.

She’s worried about further increases and doesn’t want to switch plans and risk losing access to the doctors she trusts. “We’re getting right up to the limit,” McConville said.

Amanda Malachesky, a nutrition coach in the Northern California town of Petrolia, said the elimination of the penalty for being uninsured makes dropping coverage more palatable. Her family of four pays almost $400 a month for a highly subsidized Anthem Blue Cross plan that has a $5,000 deductible.

“I’ve wanted to opt out of the insurance model forever just because they provide so little value for the exorbitant amount of money that we pay,” said Malachesky, who recently paid several hundred dollars out-of-pocket for a mammogram. “I’m probably going to disenroll … and not give any more money to these big bad insurance companies.”

Covered California is aiming to stem any enrollment losses by spending more than $100 million on advertising and outreach in the coming year. In contrast, the Trump administration spent only $10 million last year for advertising the federal exchange across the 34 states that use it.

Also, California lawmakers are looking at ways to fortify the state exchange. State legislators are considering bills that would limit the sale of short-term insurance and prevent people from joining association health plans that don’t have robust consumer protections.

However, California hasn’t pursued an insurance mandate and penalty at the state level, which both health plans and consumer advocates support. New Jersey and Vermont have enacted such measures.

Lee said it’s up to lawmakers to decide whether a state mandate makes sense.

David Panush, a Sacramento health care consultant and a former Covered California official, said some lawmakers may be reluctant to push the idea, even in deep-blue California.

“The individual mandate has always been the least popular piece of the Affordable Care Act,” he said.

Despite the constant uncertainty surrounding the health law, many insurers nationally are posting profits from their ACA business and some plans are looking to expand further on the exchanges.

In California, the same 11 insurers are returning, led by Kaiser Permanente and Blue Shield of California. Together, those two insurers control two-thirds of exchange enrollment. (Kaiser Health News, which publishes California Healthline, is not affiliated with Kaiser Permanente.)

The Covered California rate increases are fairly uniform across the state. Premiums are climbing 9 percent across most of Southern California as well as in San Francisco. Monterey, San Benito and Santa Cruz counties faced the highest increase at 16 percent, on average.

The rates are subject to state regulatory review but are unlikely to change significantly. Open enrollment on the exchange starts Oct. 15.

The ACA’s expansion of coverage has dramatically cut the number of uninsured Californians. The proportion of Californians lacking health insurance fell to 6.8 percent at the end of last year, down from 17 percent in 2013, federal data show.

 

 

The ACA stability “crisis” in perspective: Premiums Spike for Some Americans

https://www.axios.com/the-aca-stability-crisis-in-perspective-2470990374.html

Image result for sharp premium increases?

 

The big questions about the stability of the Affordable Care Act marketplaces have focused on how fast premiums will rise, and how many plans will participate. But an equally important question, and the heart of the matter politically, is: How many people will be affected by the sharp premium increases?

The bottom line: The answer is about 6.7 million Americans who buy coverage in the non-group market in and out of the exchanges, and do not receive premium subsidies. That is a significant number of people, and an urgent policy problem requiring congressional attention and action by the administration, but it’s not a system-wide health insurance crisis. The non-group market has always been the most troubled part of the insurance system, and it was far worse before the ACA.

The breakdown:

  • 17.5 million in the non-group insurance market, including:
  • 10.3 million enrolled in the ACA exchanges
  • Approximately 7.2 million buying insurance off the exchanges
    • Most of this group buys ACA-compliant plans
    • About 1.2 million in “grandfathered” plans purchased before the ACA’s market reforms took effect

Yes, 17.5 million is a sizeable number, and what happens to their health insurance coverage and costs is important. But, to put it in perspective:

  • 156 million get their primary coverage through an employer, where premiums rose a modest 3% last year for family coverage
  • More than 74 million are covered by Medicaid and CHIP.

According to our new analysis of proposed 2018 premium changes in the exchanges, double-digit increases for benchmark silver plans are quite common, though the range across major cities is large, from a 5% decrease in Providence, R.I. to a 49% increase in Wilmington, Del.

A big reason for these increases is the uncertainty in the market surrounding Trump administration policies, especially whether they will let the $7 billion in cost-sharing reduction (CSR) subsidies flow and whether the individual mandate will be enforced.

Who’s getting hit: 84% of the enrollees in the marketplaces – about 8.7 million people – receive premium subsidies under the ACA and are insulated from these premium hikes.

However, roughly 6.7 million people — the ones who buy ACA-compliant plans inside or outside the marketplace and aren’t subsidized — will feel the full brunt of premium increases. They’ll be hit if the uncertainty is not resolved and the rates do not come down before they are finalized.

In many cases, there is as much as a 20 percentage point swing or more in rates depending on whether the CSRs are paid.

The big picture: Dealing with this uncertainty is an urgent situation, particularly since it may result in some counties having no insurers at all, as well as coverage that is unaffordable for millions of Americans. But it is far from a crisis affecting most Americans and their health insurance.

The media needs to take great care to put this problem in perspective — otherwise they could unduly alarm the public and drive people to support the wrong policy solutions. Already, most Americans wrongly believe that premium increases in the relatively small non-group market affect them. So the headline should be: “Premiums Spike for SOME Americans.”

The danger in Congress is that discussion will spread too far beyond the immediate need to stabilize the non-group market, opening up all the old wounds surrounding the ACA and producing stalemate.

An Early Look at 2018 Premium Changes and Insurer Participation on ACA Exchanges

http://www.kff.org/health-reform/issue-brief/an-early-look-at-2018-premium-changes-and-insurer-participation-on-aca-exchanges/?utm_campaign=KFF-2017-August-ACA-Marketplace-Premium-Insurer-Uncertainty&utm_medium=email&_hsenc=p2ANqtz–6uJmf3Sig2nF9uD_xftlwtoQhmmZjfiDo1iT8MbRWn_OD_A-QlwQbh7pdsEViXCdqYmBAKSHmBWR2y9bNP4Av1Nnt6Q&utm_content=55155954&utm_source=hs_email&hsCtaTracking=7c0461b8-cdce-463f-91e6-3fd8cec83bd8%7C07b3debc-641b-4554-8553-510b431452b7

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Each year insurers submit filings to state regulators detailing their plans to participate on the Affordable Care Act marketplaces (also called exchanges). These filings include information on the premiums insurers plan to charge in the coming year and which areas they plan to serve. Each state or the federal government reviews premiums to ensure they are accurate and justifiable before the rate goes into effect, though regulators have varying types of authority and states make varying amounts of information public.

In this analysis, we look at preliminary premiums and insurer participation in the 20 states and the District of Columbia where publicly available rate filings include enough detail to be able to show the premium for a specific enrollee. As in previous years, we focus on the second-lowest cost silver plan in the major city in each state. This plan serves as the benchmark for premium tax credits. Enrollees must also enroll in a silver plan to obtain reduced cost sharing tied to their incomes. About 71% of marketplace enrollees are in silver plans this year.

States are still reviewing premiums and participation, so the data in this report are preliminary and could very well change. Rates and participation are not locked in until late summer or early fall (insurers must sign an annual contract by September 27 in states using Healthcare.gov).

Insurers in this market face new uncertainty in the current political environment and in some cases have factored this into their premium increases for the coming year. Specifically, insurers have been unsure whether the individual mandate (which brings down premiums by compelling healthy people to buy coverage) will be repealed by Congress or to what degree it will be enforced by the Trump Administration. Additionally, insurers in this market do not know whether the Trump Administration will continue to make payments to compensate insurers for cost-sharing reductions (CSRs), which are the subject of a lawsuit, or whether Congress will appropriate these funds. (More on these subsidies can be found here).

The vast majority of insurers included in this analysis cite uncertainty surrounding the individual mandate and/or cost sharing subsidies as a factor in their 2018 rates filings. Some insurers explicitly factor this uncertainty into their initial premium requests, while other companies say if they do not receive more clarity or if cost-sharing payments stop, they plan to either refile with higher premiums or withdraw from the market. We include a table in this analysis highlighting examples of companies that have factored this uncertainty into their initial premium increases and specified the amount by which the uncertainty is increasing rates.

Discussion

A number of insurers have requested double-digit premium increases for 2018. Based on initial filings, the change in benchmark silver premiums will likely range from -5% to 49% across these 21 major cities. These rates are still being reviewed by regulators and may change.

In the past, requested premiums have been similar, if not equal to, the rates insurers ultimately charge. This year, because of the uncertainty insurers face over whether the individual mandate will be enforced or cost-sharing subsidy payments will be made, some companies have included an additional rate increase in their initial rate requests, while other companies have said they may revise their premiums late in the process. It is therefore quite possible that the requested rates in this analysis will change between now and open enrollment.

Insurers attempting to price their plans and determine which states and counties they will service next year face a great deal of uncertainty. They must soon sign contracts locking in their premiums for the entire year of 2018, yet Congress or the Administration could make significant changes in the coming months to the law – or its implementation – that could lead to significant losses if companies have not appropriately priced for these changes. Insurers vary in the assumptions they make regarding the individual mandate and cost-sharing subsidies and the degree to which they are factoring this uncertainty into their rate requests.

Because most enrollees on the exchange receive subsidies, they will generally be protected from premium increases. Ultimately, most of the burden of higher premiums on exchanges falls on taxpayers. Middle and upper-middle income people purchasing their own coverage off-exchange, however, are not protected by subsidies and will pay the full premium increase, switch to a lower level plan, or drop their coverage. Although the individual market on average has been stabilizing, the concern remains that another year of steep premium increases could cause healthy people (particularly those buying off-exchange) to drop their coverage, potentially leading to further rate hikes or insurer exits.

What’s the Near-Term Outlook for the Affordable Care Act?

http://www.kff.org/health-reform/issue-brief/whats-the-near-term-outlook-for-the-affordable-care-act/?utm_campaign=KFF-2017-August-Health-Reform-Outlook-ACA&utm_medium=email&_hsenc=p2ANqtz–oP5wlywrzGCg7hZVAatEjF0shnUXWvPMPB7MBQfAJJXiDqeMCZIkw7rhXhhVQ7bv4RTl4IFWk3zbvJFTnYv730hVqBQ&_hsmi=54950542&utm_content=54950542&utm_source=hs_email&hsCtaTracking=b35f36e5-60c0-4e14-ba27-3e14c4025b79%7Cf0a0cb87-2715-4168-b499-2000076067bf

If Congress abandons efforts to repeal and replace the Affordable Care Act (ACA), President Trump has said he would “let Obamacare fail.” This Q&A examines what could happen if the Affordable Care Act, also called “Obamacare,” remains the law and what it might mean to let Obamacare fail.

Is Obamacare failing?

The Affordable Care Act was a major piece of legislation that affects virtually all payers in the U.S. health system, including Medicaid, Medicare, employer-sponsored insurance, and coverage people buy on their own. One of the biggest changes under the health reform law was the expansion of the Medicaid program, which now covers nearly 75 million people, about 14 million of whom are signed up under the expansion. Most Americans, including most Republicans, believe the Medicaid program is working well.

When people talk about the idea of the ACA failing, they are usually referring to the exchange markets, also called Marketplaces. These markets, which first opened in 2014, are part of the broader individual insurance market where just 5-7% of the U.S. population gets their insurance. People who get insurance from other sources like their work or Medicaid are not directly affected by what happens in the individual insurance market.

The exchange markets have not been without problems: There have been some notable exits by insurance companies and premium increases going into 2017, and in the early years of the exchanges, insurers were losing money. The structure of the ACA’s premium subsidies – which rise along with premiums and cap what consumers have to pay for a benchmark plans a percentage of their income – prevents the market from deteriorating into a “death spiral.” However, premiums could become unaffordable in some parts of the country for people with incomes in excess of 400% of the poverty level, who are ineligible for premium assistance.

Insurer participation in this market has received a great deal of attention, as about 1 in 3 counties – primarily rural areas – have only one insurer on exchange. Rural counties have historically had limited competition even before the ACA, but data now available because of the Affordable Care Act brings the urban/rural divide into sharper focus. On average at the state level, competition in the individual market has been relatively stable – neither improving nor worsening.

Premiums in the reformed individual market started out relatively low and remained low in the first few years – about 12% lower than the Congressional Budget Office had projected as of 2016 –before increasing more rapidly in 2017. Most (83%) of the 12 million people buying their own coverage on the exchange receive subsidies and therefore are not as affected by the premium increases, but many of the approximately 9 million people buying off-exchange may have difficulty affording coverage, despite having higher incomes. As might be expected, after taking into account financial assistance and protections for people with pre-existing conditions, some people ended up paying more and others paying less than they did before the ACA. Our early polling in this market found that people in this market were nearly evenly split between paying more and paying less. About 3 millionpeople who remain uninsured are not eligible for assistance or employer coverage and many of them may be going without coverage due to costs.

Our recent analysis of first quarter 2017 insurer financial results finds that the market is not showing signs of collapse. Rather, insurers are on track to be profitable and the market appears to be stabilizing in the country overall. In other words, those premium increases going into 2017 may have been enough to make the market stable without discouraging too many healthy people from signing up. However, there are still markets – particularly rural ones – that are fragile.