The individual health insurance market's average medical loss ratio ran 93.2% in 2025, up from 85.3% a year earlier (Mark Farrah Associates, September 2026). The 7.9 point move is the symptom. What a 2027 rate filing has to price against is the divergence underneath it: premiums earned grew 6.6% while medical expenses grew 16.5%, a 9.9 point growth gap.

Mark Farrah built the figures from aggregated NAIC statutory financial statements and put the consolidated health plan underwriting loss at $10.4 billion for 2025 against $1.7 billion in 2024. "Most of the loss in profitability came from the Individual and Medicare segments" (Mark Farrah Associates, September 2026). Every risk segment except managed Medicaid saw expense growth outrun premium growth.

Key Takeaways

  • 9.9 points separate individual-segment premium growth of 6.6% from medical expense growth of 16.5%. That gap, not the 93.2% level, is the quantity a filed rate increase has to close before it recovers any margin.
  • 0.1 point is how far the individual ratio moved between 2023 and 2024, from 85.2% to 85.3%. The 2025 result is a step change against a flat two-year base, not the continuation of a trend.
  • 18% Medicare Advantage expense growth against 16.1% premium growth lifted that segment to 91.0% from 89.5%, while CMS set the CY2027 average payment change at 2.48%.
  • 2 points is the employer-group gap, premium up 1.7% against expenses up 3.7%, the narrowest of the four risk segments despite a 4.2% enrollment decline to 41.4 million.
  • 15% is the median proposed 2027 individual increase across 276 filers, of which roughly 10 points is claimed medical trend and about 4 points morbidity load, leaving little for the 2025 experience gap.

Where the $10.4 Billion Came From

The four risk segments moved in the same direction and by very different amounts. Medicare Advantage added more than 1.1 million members to reach about 35.7 million, and grew premiums earned 16.1%, but medical expenses grew 18% and the segment ratio rose to 91.0% from 89.5%. Growth added members at a worse ratio than the book already carried.

Employer-group risk business shrank 4.2% to roughly 41.4 million members. Premiums earned rose only 1.7% against expenses up 3.7%, taking the ratio to 89.7% from 88.0%. Managed Medicaid was the single exception: premiums up 9.4% against expenses up 8.9% pulled the ratio down to 90.8% from 91.3%, and the segment was still unprofitable.

SegmentPremiums earnedMedical expenses2025 ratio2024 ratioEnrollment
Individual+6.6%+16.5%93.2%85.3%25.0M, down 1.5%
Medicare Advantage+16.1%+18.0%91.0%89.5%35.7M, up 1.1M
Employer group+1.7%+3.7%89.7%88.0%41.4M, down 4.2%
Managed Medicaid+9.4%+8.9%90.8%91.3%76.2M, down 2.9M

The individual result is the outlier by a wide margin, and it is an outlier against its own history rather than only against its peers. Mark Farrah's prior-year edition of the same series put the individual ratio at 85.3% for 2024 against 85.2% for 2023, a one-tenth-of-a-point move, while employer group drifted up 0.8 points and Medicare Advantage jumped 2.4 points (Mark Farrah Associates, August 2025). Individual was the stable segment through 2024 and then moved 7.9 points in a single year.

The Growth Gap a 2027 Filing Has to Close

A medical loss ratio is fully determined by the prior ratio and the two growth rates. Take 85.3%, multiply by 1.165 for expense growth, divide by 1.066 for premium growth, and the result is 93.2%. The reported level carries no information the two growth rates do not already contain, which is why the gap is the useful number.

Enrollment does not rescue the arithmetic. The individual segment lost 1.5% of members to about 25 million, its first decline since 2019, and dividing both the premium and the claim aggregate by the same smaller membership leaves the ratio untouched. On a per-member basis, premium rose roughly 8.2% and medical expense roughly 18.3%, a gap of about 10 points rather than 9.9.

Membership loss is ratio-neutral only if the members who left cost the average. They did not. The exits following the enhanced premium tax credit expiration skew toward the healthy and the subsidy-sensitive, so the surviving pool carries higher average morbidity than the 25 million headcount suggests, and the observed 18.3% claim trend already embeds a mix shift that will continue into the 2027 experience period.

The narrower comprehensive individual major medical book shows the same shape at closer range. Mark Farrah's June brief put premiums at $577 PMPM against $549 in claims, with premium up 3.1% and claims up 11.4%, and a $5.5 billion underwriting loss on 21.3 million members (Mark Farrah Associates, June 2026). Small group swung from a $282.6 million gain to a $507.5 million loss on a 7.9% enrollment decline.

Set that against the filed asks. Insurers proposed a median 15% individual increase for 2027 across 276 filers, with a 25th-to-75th percentile band of 11% to 22% (Peterson-KFF, August 2026). Roughly 10 points of that is claimed underlying medical and pharmacy trend and about 4 points is the morbidity adjustment for the post-subsidy pool. What remains is roughly a point, against a 2025 experience gap of ten.

Medicare Advantage faces the tighter version of the same constraint because its revenue is set administratively rather than filed. CMS put the CY2027 average payment change at 2.48%, or 4.98% including expected risk score trend, built on a 5.33% effective growth rate net of a 1.12 point risk model revision and a 1.53 point diagnosis-source adjustment (CMS, April 2026). A book running 18% expense growth cannot reprice into that.

The Rebate Window Is Rotating Past the Profitable Years

One distinction the comparison needs. The 93.2% here is incurred claims over earned premium as reported in statutory filings. The 80% floor is tested against the ACA statutory ratio, which adds quality improvement expense to the numerator and removes taxes and fees from the denominator, then credibility adjusts and averages over three years. The two are close in a bad year and not the same number, so the gap below is directional.

The 80% medical loss ratio floor is one-sided. It caps what an individual or small group carrier may retain for administration, commissions and profit, and it obliges a rebate when experience comes in rich. It provides nothing at the other end. A block at 93.2% has consumed the entire 20% allowance and 13 points beyond it, with no offsetting mechanism.

That asymmetry is currently masked by the averaging. Rebates paid in 2026 total $759.2 million and are computed from 2023, 2024 and 2025 data (KFF, July 2026). Two of those three years ran near 85%, which is what still generates a rebate obligation for some carrier-state blocks despite the 2025 result. KFF independently puts the 2025 individual simple loss ratio at 93%, arriving from Supplemental Health Care Exhibit filings rather than the aggregated statutory blanks Mark Farrah uses, which is a useful corroboration of the level from a separate reporting path.

Rotate the window forward and the cushion disappears. The 2027 rebate cycle averages 2024 through 2026, and the 2028 cycle averages 2025 through 2027, at which point the two 85% years have left the calculation entirely. Rebate liability in the individual market goes to approximately zero.

The disappearance of a payable is not a recovery. It removes the last accrual that was still, mechanically, transferring 2023 and 2024 margin back out of the segment, and it leaves the filed rate as the only lever, aimed at a pool that has already begun contracting for the first time in six years. The 2025 experience period does not get recovered on that rate. It gets carried into a filing whose 15 points are consumed by trend and morbidity before they reach the gap at all.

Further Reading

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