Health Insurers’ Financial Performance and Quality Improvement Expenditures in the Affordable Care Act’s Second Year

The Affordable Care Act requires health insurers to rebate any amounts less than 80%–85% of their premiums that they fail to spend on medical claims or quality improvement. This study uses the new comprehensive reporting under this law to examine changes in insurers’ financial performance and differences in their quality improvement expenditures. In the ACA’s second year (2012), insurers’ median medical loss ratios continued to increase and their median administrative cost ratios dropped, producing moderate operating margins in the group markets but a small operating loss in the individual market, at the median. For-profit insurers showed larger changes, in general, than did nonprofits. For quality improvement, insurers reported spending a significantly greater amount per member in their government plans than they did on their self-insured members, with spending on commercial insurance being in between these two extremes. The magnitude and source of these differences varied by corporate ownership.