Study: ‘Big five’ insurers depend heavily on Medicare, Medicaid business

https://www.fiercehealthcare.com/cms-chip/big-five-insurers-medicare-medicaid-growth-profits?mkt_tok=eyJpIjoiT0RnMFkySXdPV0psWldSaCIsInQiOiJQSllQNlpcL2RhTzBDZFwvZXh5M1ZUSDJyUU5JTGw3dnh1QTVac01rZUFcL2pNUUhhMXBaQjBxK29ScHRrOHhsT3d6aE5pcFRJUWd4Sm0rYXA4S0RYVGE2N0czN2hhc2hsXC9EZk9mSGVLR0V1UFlwVDZpQmdkcll0eTBMNDUzTHlIZDIifQ%3D%3D&mrkid=959610&utm_medium=nl&utm_source=internal

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Even as they’ve retreated from the Affordable Care Act exchanges, the country’s biggest for-profit health insurers have become increasingly dependent on Medicare and Medicaid for both profits and growth.

In fact, Medicare and Medicaid accounted for 59% of the revenues of the “big five” U.S. commercial health insurers—UnitedHealthcare, Anthem, Aetna, Cigna and Humana—in 2016, according to a new Health Affairs study.

From 2010 to 2016, the combined Medicare and Medicaid revenue from those insurers ballooned from $92.5 billion to $213.1 billion. The companies’ Medicare and Medicaid business also grew faster than other segments, doubling from 12.8 million to 25.5 million members during that time.

All these positive trends, the study noted, helped offset the financial losses that drove the firms to reduce their presence in the individual marketplaces. Indeed, the big five insurers’ pretax profits either increased or held steady during the first three years of the ACA’s individual market reforms (2013-2016). Their profit margins did decline during those three years, but stabilized between 2014 and 2016.

Not only do these findings demonstrate the “growing mutual dependence between public programs and private insurers,” the study authors said, but they also suggest a useful policy lever. The authors argued that in order to help stabilize the ACA exchanges, federal and state laws could require any insurer participating in Medicare or state Medicaid programs to also offer individual market plans in those areas.

Nevada has already done something similar: It offered an advantage in Medicaid managed care contract billing for insurers that promised to participate in the state’s ACA exchange. The state credited that policy with its ability to coax Centene to step in and cover counties that otherwise would have lacked an exchange carrier in 2018.

It’s far less certain, though, whether such a concept will ever be embraced at the federal level during the Trump administration, since its focus has been on unwinding the ACA rather than propping it up.

Either way, recent events underscore the study’s findings about how lucrative government business has become for major insurers. One of the main goals of CVS’ proposed acquisition of Aetna is to improve care for Medicare patients, which would help the combined company “be more competitive in this fast-growing segment of the market,” CVS CEO Larry Merlo said on a call this week.

Aetna CEO Mark Bertolini added that the transaction has “incredible potential” for Medicare and Medicaid members, as the goal is to provide the type of high-touch interaction and care coordination they need to navigate the healthcare system.

 

Moody’s: Trump Executive Actions Credit Negative for HIX Insurers

http://www.healthleadersmedia.com/health-plans/moodys-trump-executive-actions-credit-negative-hix-insurers?spMailingID=12171449&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1261586415&spReportId=MTI2MTU4NjQxNQS2

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The investor-service company gauges impact of new ‘association’ health plans, expanded short-term insurance, and elimination of subsidies on the Obamacare exchanges.

President Donald Trump’s health-insurance executive actions last week are credit negative for insurance carriers operating on the Obamacare exchanges, New York, NY-based Moody’s Investors Service reported today.

On Oct. 12, Trump took two executive actions that will likely undermine the insurance exchanges established under the Patient Protection and Affordable Care Act (PPACA), Moody’s says:

  • In an executive order, the president eased regulations on “association” health plans and expanded the definition of short-term health insurance. The executive order calls for the federal departments of Labor, Treasury and Health and Human Services to expand insurance coverage for individuals such as allowing insurance purchases across state lines.
  • Although regulations must be put into place, association health plans will likely allow small businesses to band together to offer insurance to their employees. “Associations likely would be allowed to offer plans with lower benefits and lower costs,” Moody’s reported.
  • In a decision that did not require an executive order, Trump announced that his administration would end cost-sharing reduction (CSR) payments that subsidize the purchase of health insurance on the exchanges. The subsidies help insure low-income individuals who do not qualify for Medicaid coverage but can’t afford to buy commercial insurance health plans.
  • This year, the federal government spent about $7 billion on CSR payments.

The executive order is expected to promote creation of skimpy health plans, which would undermine the PPACA exchanges, Moody’s reported. “The introduction of lower-benefit, lower-cost plans and short-term insurance would be credit negative for health insurers that are still participating in the PPACA-governed individual market. These new plans would incentivize healthy people to exit the PPACA market, which would increase risk in the remaining pool of insureds.”

The decision to stop CSR payments will also have a credit negative effect on commercial carriers operating on the exchanges, Moody’s reported. This negative impact will fall particularly hard on commercial insurers that did not submit rates for next year based on the assumption that the CSR payments would be eliminated.

Health insurance rates are set on a state-by-state basis.

There could be an “offset” linked to the executive order that would soften the financial blow for commercial carriers operating on the exchanges, Moody’s reported. “If the executive order succeeds in bringing more healthy but currently uninsured people into the small group or individual market, that could mitigate at least some of the order’s negative effects.”

Moody’s highlighted the PPACA-exchange risk exposure of four commercial carriers in today’s report, which lists the companies’ beneficiaries on the exchanges as a percentage of their total number of health-insurance beneficiaries:

  • Indianapolis-based Anthem Inc.: 2.9%
  • Chicago-based Health Care Service Corporation: 6.8%
  • St. Louis-based Centene Corporation: 9.2%
  • Long Beach, CA-based Molina Healthcare Inc.: 20.4%