Two market reports on the health insurance industry shows improvement in the individual market and continued growth among insurance segments.

The two reports are the McKinsey and Company's "Insights into the 2020 Individual market," and the "Best's 2020 Review/Preview" market segment report, released by the AM Best credit rating agency.

The two reports on the whole contain good news: Best noted that health insurers' earnings reached record highs in 2019, and the McKinsey report found that the U.S. individual health insurance market is seeing increased choice for consumers along with decreased premiums.

McKinsey: stronger markets, more choices

The McKinsey report found that carrier participation in the ACA exchange markets continues to increase. The number of insurance carriers in the market grew both in 2019 and 2020, after three years of declining participation, the report said. In 2020, there are a total of 245 carriers in the ACA exchanges, with 27 new entrants, and only one plan exiting. This is the highest number of entrants in a single year since 2016. Overall, the last two years have seen 52 new entrants into the ACA exchanges, and only two carriers exiting the market.

Consumer access is also increasing; the report found that the proportion of counties with only one carrier available decreased from 36 percent of counties in 2019 to 25 percent of counties in 2020. Presently, McKinsey's analysts estimate that 9 percent of consumers in the U.S. have a single carrier offered in their county, while 66 percent can choose from at least 3 carriers. About 25 percent of Americans have two carriers available to choose from in their county, the report said. The percentage of those with 3 or more carriers to choose from is the highest since 2016.

In addition to increased access to plans, consumers saw premiums decline for 2020. The McKinsey report found that in both 2019 and 2020 premiums for all levels of individual plans decreased by about 1 percent (2 percent in 2019 for the bronze plans). The Platinum plans—the plans with the most generous benefits in the individual market–saw increased premiums in those two years, but at much lower rates than in previous years. Since 2015, platinum premium increases have been at +23 percent, +22, + 18, +2, and +3 for 2020.

AM Best: insurance segments continue to be profitable

The Best report said that U.S. health insurance companies will remain profitable in 2020 after earnings in 2019 reached record highs and credits the strength of the ACA markets as a reason for that trend. "Key drivers of the growth in earnings include continued improvement in the individual Affordable Care Act (ACA) exchange market business; broad-based decline in utilization; and persistent lower medical cost trend, especially for prescription drugs," the report said. "Premium revenue for the publicly traded segment grew by 13 percent on average, driven mainly by premium increases as overall membership remained essentially flat."

The report also said government-funded plans such as Medicare and Medicaid, which are administered by insurance carriers, will remain a focus for carriers, since so many Americans are on these plans. The company expects Medicaid earnings to remain profitable this year, even though enrollment has been declining. Growth among Medicare plans is expected to continue "for the foreseeable future," although some types of plans could have relatively small profit margins, the Best report said.

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Insurance industry reports find profits up for carriers, expansion of choice for consumers

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