The gap between the haves and have-nots has grown wider in the health insurance sector—and policy changes may be the culprit.
Most health plans are relatively small, posting an annual revenue of less than $2 billion, and are generally close to just breaking even financially. But the top three largest fully insured health plans by revenue—UnitedHealth Group, Kaiser Foundation Health Plan and Anthem—“exhibit performance that is dramatically differentiated from that of other market participants,” according to a new analysis from Deloitte.
For example, between 2011 and 2016, the top three saw their share of underwriting gains rise considerably even as their share of enrollment and revenue declined. By 2016, those three plans generated 84% of all underwriting gains in the fully insured market, while they accounted for just 55% in 2011. The top 10 plans, meanwhile, accounted for 92% of all underwriting gains in 2016.
What was behind that trend? Post-2014, one of the main reasons was the “number and magnitude of the losses suffered by many other health plans,” particularly in Affordable Care Act commercial individual products, the analysis said. Those losses were so large that they offset almost all the underwriting gains posted by the health plans not in the top three or top 10—thus magnifying the largest plans’ share.
For-profit insurers also grew faster and posted significantly higher margins than their nonprofit peers, the analysis found. While for-profit plans accounted for 66% of all underwriting gains in 2011, that share rose to 76% by 2016. Nonprofit plans, in comparison, saw their underwriting margins slip from 2.3% in 2011 to 0.8% in 2016.
The analysis also looked at health plan performance on the company and state levels. It found a significant increase in the number of plans with annual losses, a steep decline in average margins and widening variation among plans’ performance from 2011-2016. In addition, the number of states with health insurance market turbulence and unfavorable health plan financial performance increased.
Deloitte said its findings showed how large of a role public policy has played in driving change in the insurance markets in recent years. In addition, it highlighted the financial benefits associated with national scale.
Yet the firm also pointed out that it’s worth paying attention to how smaller-scale nonprofit plans are faring, given that they “play critical roles in their local communities and healthcare ecosystems.”
These plans, it noted, may lack the resources to withstand more disruption and “down years.” But with Republicans moving to unwind the ACA, that’s exactly what might lie ahead.