Best’s Special Report: U.S. Life/Health Impairments Drop in 2017; Affordable Care Act Co-Op Plans Continue to Falter

Three health insurance Consumer Operated and Oriented Plans formed through the Affordable Care Act (ACA), known as co-ops, became impaired in 2017, representing all U.S. life/health impairments in the last year and 18 of 20 impairments since 2015, according to a new A.M. Best special report.

The Bests Special Report, titled, 2017 Life/Health Impairments Update, states that from 2000 to 2017, 159 life/health insurers became impaired. The impairments consisted of 132 insolvent liquidations, 25 rehabilitations (of which 13 were closed during the period and 12 remain open at the time of this report) and two conservation actions. A.M. Best defines impairments as being situations in which a company has been placed, via court order, into conservation, rehabilitation or insolvent liquidation. Supervisory actions undertaken by insurance department regulators without court order were not considered impairments for this study unless delays or limitations were placed on policyholder payments.

While there are specific causal factors identified for 53 of the impairments, most fell into the category of general business failure arising out of some combination of poor strategic direction, weak operations, internal controls weaknesses or underpricing and under-reserving the business. However, the significant challenge of operating as a qualified nonprofit health insurer under the ACA was the leading specific cause and was present in 19 of the impairments.

During the 2000-2017 period, 72% of the impairments concerned health (90) and accident and health (25) insurers, while 15% (24) related to small life insurers primarily focused on selling lower policy value industrial/burial or stipulated premium business in the South. The remaining 13% of impairments involved fraternal entities (five), annuity writers (eight), and other life or combined life, annuity and health business (seven). Along with the 2017 impairments, six of the seven health insurer impairments in 2015 and nine of the 10 insurer impairments in 2016 related to the co-op plans.

To access the full copy of this special report, please visit


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