Health insurance companies continue inching away from employer-sponsored plans to government-sponsored business. Medicaid managed care and Medicare Advantage plans now make up more than half of health plans’ premiums combined, A.M. Best said in a new report.
Employer plans once dominated the private market, but they dropped to just 38% of total net premiums written (NPW) in 2017.
Medicaid’s NPW grew the most of any health insurance sector over the past 10 years. The Affordable Care Act’s Medicaid expansion pushed Medicaid managed care’s NPW from $43.1 billion in 2007 to $224 billion last year, A.M. Best said.
Despite payers' finding success in government plans, the move generally means lower margins with private insurers relying more on state and federal funding. That's a potential downside.
A.M. Best said greater reliance on government payments “could lead to short-term liquidity pressure because of the timing of the receipt of funds and possible delays related to budgetary issues.”
Regulations and legislation could lead to unpredictability, especially in the ACA exchanges. “With healthcare remaining a controversial political issue, the regulatory regime is likely to remain volatile over the near to medium term, especially as it relates to the individual exchange segment,” A.M. Best said.
Nevertheless, private payers are increasingly embracing offering public plans. Medicaid’s NPW share increased from 10.2% in 2007 to 27.1% in 2017. Most of that growth came in 2014 and 2015 after states could expand Medicaid to 138% of the federal poverty line. Medicaid expansion added more than 14 million Medicaid recipients.
Medicare Advantage has grown from $69.9 billion in 2007 to $202.7 billion in 2017. It represented 24.5% of overall industry premiums in 2017. Both Medicaid and Medicare Advantage have seen flat business over the past few years, A.M. Best said.
However, more payers are interested in testing the Medicare Advantage market. One reason is that aging Baby Boomers are a fresh market for MA payers.
UnitedHealthcare and Humana still make up the two largest Medicare Advantage payers, but Aetna, Anthem, WellCare and Centene have all grown MA membership this year. Oscar Health also announced this week that it’s expecting to expand to MA in 2020.
Commercial premiums still make up the largest percentage of single sector premiums. That’s dropped from 58% in 2007 to 38% in 2017.
Things aren’t all negative in the commercial market, though. In fact, insurance companies’ cost-containing policies and benefit design have brought stability. Payers have been able to maintain low single-digit annual premium increases in the employer market this decade. Mercer’s recent National Survey of Employer-sponsored Health Plans said those plans’ premiums have increased about 3% yearly since 2012.