Financial gap is growing between largest payers and the rest of the pack
A new analysis of health insurance companies between 2011 to 2016 found payer financial performance varies greatly.
The Deloitte Center for Health Solutions found that “the top line prospered while the bottom line deteriorated.” Fully-insured health plans’ revenue increased 55% in the period, but underwriting gains in the final year were 29% below the first year.
Nearly half of fully-insured payers reported underwriting losses in 2014, 2015 and 2016. In 2011, only 21% of insurers reported underwriting losses.
Deloitte found a widening gap between top payers and the rest of the pack. The report found a “significant increase” in plans that experienced annual losses, a steep decline in average margins and a “widening performance variation among plans.”
The top three U.S. health plans in every year of the study — UnitedHealthcare, Kaiser Foundation Health Plan and Anthem — generated 84% of total underwriting gains in 2016. The top 10 payers accounted for 92% of total underwriting gains.
The top three health plans have also pulled away from the rest of the top 10. The top three insurers had 30% of the market, which accounts for 55.2 million members, and 34% of the revenue in 2016. All other plans totaled 129.3 million members. Market share for the top 10 payers was 58% and they collected 61% of the revenue.
For-profit health plans were especially successful in the period. For-profit payers accounted for 76% of underwriting gains compared to a 66% share in 2011.
The researchers found that scale plays a critical role for payers. A payer’s financial performance benefits from having national scale, which gives payers with larger footprints like UnitedHealthcare and Anthem an advantage over smaller state-based plans.
The Deloitte report gave a view of 2011-2016, but much has changed even since last year. The report did not get into more recent payer market developments, including the proposed CVS-Aetna deal. There are many questions about what the deal could mean for the payer market: Will other large payers look to branch out and purchase CVS competitors or expand into other areas? Will mergers among competing payers heat up? Will the CVS-Aetna deal save money, improve care coordination and reshape healthcare?
There is also concern about the ACA exchange market in 2019 and beyond. Large payers like UnitedHealth and Anthem pulled back from the exchanges this year. Meanwhile, the top two Medicare Advantage (MA) payers, UnitedHealth and Humana, both plan more investments in that market. Unlike the ACA exchanges, payers are flocking to MA and view that market positively with its constant flow of newer, healthier members and more favorable reimbursements and patient populations than the individual market.
Healthcare Dive recently offered five payer trends to watch over the next year:
- Payers will continue to ramp up ways to cut costs.
- Greater emphasis on value-based care and contracting.
- More outpatient and virtual care utilization.
- Consumers want cost, quality transparency.
- More payer/provider partnerships.