Health care providers that ventured into the health insurance business a couple of decades ago often found the marketplace a difficult one. In some cases, they paid a price when it came to their ratings by objective third-party agencies.
Now an A.M. Best report indicates these provider-owned plans are faring better today despite—or perhaps because of—marketplace changes brought about by health care reform.
The report's title, "Provider-Owned Plans Fare Well In Wake of the Patient Protection and Affordable Care Act," sums up the research well. A.M. Best discovered that many of these local and regional health plan operators are doing a good job by most measures.
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"Provider-owned plans have been able to keep up with the rest of the industry in terms of membership expansion, profitable premium growth and risk-adjusted capitalization," the report said. "In 2014, the [Patient Protection and Affordable Care Act] brought with it a flood of regulatory and environmental changes; nevertheless, the industry has stood strong; and national, regional and local plans were able for the most part to successfully manage through the implementation and execution of strategies designed for the new landscape."
Among the highlights of the study, based upon 2013 performances:
- Premium revenue grow 5.5 percent; a faster pace than that of the health industry as a whole.
- Generally stable expenditure development; leveraging off their strategic ownership structures and favorable contracting agreements.
- Underwriting margins fluctuate widely, with overall margins falling to 1.9 percent in 2013 from 2.5 percent in 2009, with a notable spike in the interim in 2011.
- Overall profit margins stabilize and flatten in the past five years, with a slight upward trend reported through 2013 across the provider-owned plan population. The overall industry has showed a small decline.
"A few instances of financial issues were experienced by smaller local carriers due to excessive growth, mispricing and/or earnings and capitalization concerns. However, these were in the minority, and for 2014, A.M. Best has again reported more ratings affirmations and upgrades than downgrades in the health sector," the report said. "While results have fluctuated on a year-over-year basis, provider-owned plans in this study reported favorable trends in aggregate and have fared even better in some metrics than some of their industry peers."
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
