Mark Farrah Associates has published the latest in its regular series examining the results of managed care companies. (MFA Report) In 2012, total revenues from insured business for health plans increased 6.3%, to $435.2 billion. The number of people covered grew only .4%, suggesting that most of the revenue increase is due to per person cost increases. And indeed, medical expenses rose 7.5%, faster than the revenue increase so net margin was only 2.7%, down from 3.6% in 2011. Commercial membership shrank to 44% of revenues, down from 60% in 2006, while Medicaid revenues rose to 18% of the total in 2012, up from only 10% in 2006. Medicare accounted for 22.7% of revenue and FEHBP for 7.3%. Health plans are becoming increasingly reliant on unpredictable, unreliable government health programs for both total revenue and revenue growth. Medical expenses were 85% of the premium dollar in 2012, up from 84% in 2010, for commercial lines. For Medicare, medical expenses have been fairly stable at 85% of premium for several years, while in Medicaid the percent of premium for medical costs rose from 85.5% in 2010 to 87.5% in 2012. About 73% of total medical payments go for hospital and physician services and around 16% goes to drugs. The report suggests that various medical loss ratio rules are having an impact on plan profitability and perhaps rates.
