Health Plan Financial Performance to Date in 2017

We all read about large price increases for the individual exchange market and hear the concerns about losses expressed by health insurers.  Mark Farrah Associates looks at how they are actually doing so far in 2017.   (MFA Report)   The firm uses data from the National Association of Insurance Commissioners statutory financial filings.  This often gives a more accurate picture than even the SEC reporting from large public insurers.  Looking at the individual insurance segment, which may include off-exchange as well as exchange policies, results appear to have improved from 2016.  Premiums increased 8.6% year-over-year through the first six months of 2017, while medical expenses decreased 6.1%.  That is a gross margin swing of almost 15%.  On a per member per month basis, premiums increased even more, 21%, while medical costs rose 4.7%.  While the pmpm rise in premiums may be a positive for the health plans, it is pure pain for the covered individuals.  The medical expense ratio at mid-year 2017 was 77%, meaning the plans were likely solidly profitable in this segment.  The number of people covered, however, has dropped, probably due both to price and to increased employment shifting people to workplace plans.

Premiums and medical expenses were basically flat on an aggregate basis through mid-year 2017 in the employer-based segment, but on a per member per month basis they rose 6.4%, while medical expenses were up only 5.6%, meaning that plans are seeing better profits in this segment as well, as the medical expense ratio is only 81.8%.  Medicare Advantage, which has surpassed the group business to become the second largest source of premiums for the health insurance industry, also is seeing good results.  Premiums rose to an aggregate of $86 billion in this segment, an increase of 7.1% from the comparable period in 2016, while medical expenses grew 7.7%.  But the medical cost ratio, which is statutorily controlled, was an excellent 85.7%.  Since the average monthly premium is quite a bit higher, the same profit margin per cent on MA as for an employer group would result in a lot more absolute profit dollars.  Member months also increased significantly, by 5.7%, reflecting economic growth.  The largest single contributor to premiums is the Medicaid managed care segment, with an aggregate of over $90 billion in premiums, but a much lower pmpm revenue than for MA.  The loss ratio for Medicaid remains relatively high, at 91%.  Medical expenses rose 13.3%, much faster than premium at 8.8%.  It will be interesting to see how the insurers react to this situation. But overall, the health plans appear to be having a very good year and really have no basis for complaining about aggregate profitability.