I doubt I’m going out on a limb by saying that the “kid in the candy store” perspective that insurance companies may have had about the Affordable Care Act has all but vanished.   A new Standard & Poor’s report released this week supports that the “candy store” notion is now no more than illusion and provides further indications that ObamaCare is sputtering and may well be reaching a Tipping Point.

Among the findings in the S&P report:

  • Based on 2014 and expected 2015 results the individual market ACA business is proving unprofitable for insurance carriers.
  • Carriers are experiencing ACA related operating losses and the government is only making good on about 12% of the risk corridor payments promised to those carriers operating at a loss on their ACA book of business. (Note: Risk corridor payments were designed to encourage insurance companies to play in the government-run exchange space by insulating the carriers from losses experienced in the first few years of Obamacare).
  • The losses in the individual ACA market are expected to continue. This is impacting product and pricing strategies and reflecting in a combination of higher rates, further erosion of provider networks (severely limiting consumer choice of providers) and diminishing coverage and plan options.
  • Some carriers are seriously evaluating getting out of the exchanges altogether.
  • The lack of profitability is having less of an impact on large national carriers (eg. UHC, Aetna, Cigna) where ACA plans are a smaller portion of their total biz. It is having much more of an effect on single region Blues plans.
  • According to the S&P report, while results thus far are not impacting the creditworthiness of the insurers at this time, they could down the road. The report states that this is especially true for those carriers with a significant share of ACA business.

Tipping point for Obamacare?  Maybe.

On the ropes?  Who knows.

Sputtering?  Definitely.

There’s probably a lot about the ACA story still to be written. However, the fact that ACA’s financial impact clearly has garnered this type of attention from a world leader of financial market information like S&P seems worth noting.  At least it does in this corner.  And, the rest of the story promises to be interesting.