In 2011, health insurers faced numerous challenges related to the implementation of the Patient Protection and Affordable Care Act, new regulations and formidable economic conditions. Even with the emergence of these requirements and environmental difficulties, most carriers fared well and operating results remained strong due to a continued trend of low utilization. For 2012 and beyond, A.M. Best Co. expects margins may compress as health insurers are confronted with the full-year impact from the new rate-reasonableness requirement, and as utilization slowly rises. — While utilization was lower for the second consecutive year, overall earnings were impacted by the minimum medical loss ratio (MLR) requirement, which did impact margins for some companies. — The minimum MLR requirements were implemented, and for 2011, most insurers adjusted pricing to comply. — On September 1, 2011, the rate-reasonableness requirement went into effect, which mandates that individual and small-group market rate increases of 10% or more need to be actuarially justified. — Health insurers are contemplating strategies for the future, which include marketing to individuals, growth in Medicaid, and ways to streamline processes and lower administrative costs. — Health insurers and providers have a renewed interest in cooperation and improved coordination of care. Both providers and insurers are studying and experimenting with reimbursement methods that are based upon care management and outcomes. — National health care expenditures, as a percentage of gross domestic product, reached 17.7% in 2011, and continues to climb with a 20% increase in Medicaid expenditures projected in 2014. By Carole Lovell A.M. Best Company, Inc.