Results of Major Health Plans

In a new report covering the first six months of 2013, Mark Farrah Associates looks at results among the top seven US health insurers–Aetna, Cigna, HCSC, Humana, Kaiser, UnitedHealth and WellPoint.     (Mark Farrah Associates Report)   These large insurers cover about 45% of the US population.  Profit margins across the plans averaged 5% for this time period, about the same as the year earlier period, but down from an average of 9% in 2008.  The range in profit margin was only about 2.1% compared to 4.8% in 2012.  Cigna led the way at 6.38%, followed by UnitedHealth at 6.2% with Humana bringing up the rear at 4.29%.  Two primary causes of the profit margin drop and narrowing of spread are the new minimum medical loss ratio requirements and a shift from fully-insured to self-insured business.  As government business through Medicare and Medicaid grows, and since those lines typically have lower profit opportunities, overall margins also tend to shrink.  Overall membership showed healthy gains, from 131.6 million in June 2012 to 143.3 million in June 2013, an 8.8% increase.  But much of this growth resulted front the Aetna acquisition of Coventry and the WellPoint acquisition of Amerigroup.  Self-insured membership grew faster than insured, adding 6.5 million people compared to 5.2 million full-risk members.  Self-insured totals 79.4 million enrollees compared to 63.9 million full-risk ones, but much of the full-risk is in government programs.  While all the plans showed gains, much of the gain for several was due to acquisitions.  The impact of the health exchanges on many of these large insurers is likely to muted initially, as most of them were very cautious in offering plans on the exchanges.  While profit margins have dropped, they are still adequate to allow reinvestment and provide a good shareholder return and these large insures in aggregate continue to gain market share, further concentrating the US health care coverage market.