Healthcare IT Interoperability, EHR interoperability, Hospital Interoperability

Private Payers News

Healthcare Insurance Market Profits May Hold Steady in 2018

Despite changes to the ACA, certain profitable segments of the US healthcare insurance market may make up for deficits in 2018.

Health insurance market to hold steady in 2018

Source: Thinkstock

By Thomas Beaton

- Certain segments of the healthcare insurance market, including employer-sponsored insurance and Medicare Advantage (MA), will help to stabilize payer profitability in 2018, predicts a report by A.M. Best. The gains from these sectors are expected to make up for slowed or neutral growth in individual health plan markets and Medicaid.

While 2017 saw significant revisions to the ACA, including removal of individual mandate and the expansion of association health plans, the report predicts that payers will have enough time to adjust to the changes before they start to impact profitability, which will contribute to shorter-term stability.

“The majority of the changes to the ACA that were recommended in the proposed bills would take effect in the medium term (2020 and beyond), which would give insurers time to react and prepare,” A.M Best explained.

“Furthermore, insurers have been able to handle the challenges facing the industry so far, and we do not expect any significant deterioration in market conditions over the next year.”

Employer-sponsored insurance has created profitable opportunities for payers through the increased use of value-based provider arrangements, which has allowed employers to become more educated about their costs, A.M. Best said.

READ MORE: How Payer Philanthropy Can Address Social Determinants of Health

A.M. Best believes that lower healthcare utilization rates from high-deductible health plan members has also helped reduce costs and create profitability improvements. Profitability in the employer-sponsored remained high even though employer-sponsored health membership stagnated.

“The economic and employment growth experienced in the US has not translated into organic growth for employer group membership, as additions to staff have been concentrated in part-time and contractual workers, most of whom are not eligible for medical benefits.” A.M. Best said.

The report projects that the Medicare Advantage market is expected to experience premium revenue growth and higher membership rates throughout 2018, acting as a stabilizing force on the nation’s payer market. Payers are likely to capitalize on a growing geriatric population in the US that age into Medicare.

“Health insurers remain focused on Medicare Advantage, given the large number of individuals aging into Medicare every day, a trend that will persist as the baby boomers turn 65,” A.M Best said. “As such, premium and membership growth are expected to continue.”

Challenges in the 2018 MA market include new insurer fees, a price-sensitive consumer base, growth in competition, and expected efforts to maximize profit margins present challenges. But A.M. Best believes that most MA payers are likely to absorb new fees and should remain profitable even with these emerging challenges.

READ MORE: Affordable Care Act Changes May Bring a Rocky 2018 for Payers

Analysts at PricewaterhouseCoopers (PwC) agreed with the A.M. Best team and also suggested the MA market is poised to grow throughout 2018. PwC projected that MA enrollment will grow by 8 percent to a total of 21 million beneficiaries in the US.

Previous research from A.M. Best and the Kaiser Family Foundation also found that MA premium revenues grew from $69.9 billion in 2007 to $187.5 billion in 2016, indicating an upward trend in profitability.

Vertical integration between providers, payers, and pharmacy benefit managers (PBMs) could also create significant cost-saving opportunities and allow payers to develop new business segments, A.M. Best suggested.

Larger-scale payer-to-payer mergers did not fare well in 2017, but recent developments in payer-provider and payer-pharmaceutical mergers led A.M. Best researchers to suggest there are new opportunities for payers to increase earnings through industry consolidation.

One of the most impactful changes would come from CVS Health’s $69 billion dollar acquisition of Aetna. The merger would combine the nation’s largest PBM with one of the nation’s leading healthcare payers.

READ MORE: Payer, Provider Collaboration Required for Accountable Care Success

In addition, Humana plans on acquiring a $800 million minority share in Kindred Healthcare as an entry into the home health market. And UnitedHealth Group subsidiary Optum has agreed to acquire DaVita Medical Group for $4.9 billion to increase its footprint in the care delivery environment.

A.M. Best believes that the individual health plan market will remain stable in 2018 as it did in previous years. The individual health plan market in 2016 and 2017 was driven partially by back-to-back years of higher premium rate increases and a narrowing of provider networks, A.M. Best said.

The report added that as more payers exited individual insurance markets, the remaining payers selling individual insurance had stable beneficiary enrollment which allowed for more accurate determinations of expected healthcare costs.

“More health insurers are reporting greater stability in their membership, with members staying with the same carrier from year to year,” A.M. Best added.

“This stability provides insurance companies an opportunity to engage members in population health management and to aid in improving an individual’s health and to prevent unnecessary hospitalization owing to untreated medical conditions. Furthermore, consistent membership can improve the predictability of claims experience.”

Growth may be limited in this market because policy challenges could potentially offset financial opportunities to engage individual health plan consumers.

A.M. Best projected Medicaid profits to slow down in 2018 as Medicaid expansion decelerates from both 2014 and 2015 rates. A.M. Best believes that states will take more proactive approaches to review eligibility requirements once they become accountable for 10 percent of their Medicaid costs.

Medicaid is expected to remain marginally profitable, A.M. Best suggests, even though risk-adjustment concerns could play a factor in profits.

“Because the health risk of this population was unknown, rates may have been set higher initially to account for the uncertainty,” A.M. Best added. “With claims history/risk on the Medicaid expansion population now known, margins could compress slightly.”

Payers could have a positive year in 2018 as they continue to engage within profitable health plan markets and proactively adjust health plan offerings that work around political challenges.

X

Sign up for our free newsletter:

Our privacy policy

no, thanks

Continue to site...