The Deloitte Center for Health Solutions issues a report examine how health plans are doing from a financial perspective. (Deloitte Report) This report looks at fully-insured performance; that is, when the health plan accepts a premium in exchange for taking full risk on the medical expenses. Four lines of business are considered: commercial group, commercial individual, Medicare and Medicaid. These fully insured plans covered 57% of Americans in 2016. The data source was the National Association of Insurance Commissioner reports filed by health plans in the states, which is a pretty reliable source, with good definitions. During the five years from 2011 to 2016, revenue for this kind of business for the 238 plans in the study rose 55%, and enrollment grew 29%, from 143 million to 184 million; but underwriting gains were 29% less in 2016 than in 2011. In 2011, underwriting gains were $19.2 billion and in 2016 they were $13.6 billion. The underwriting margin was 3.5% in 2011 and 1.6% in 2016. There was a decrease in average profit margins and more plans had annual losses. The largest plans are doing the best; in 2016 the three largest plans by revenue had 84% of all underwriting gains. As you would expect and hope, for-profit plans were growing faster and had higher margins than did non-profit ones. The performance of plans also began to show greater variation, with the gap between the best and worst performing plans increasing. Those top three plans in every year were UnitedHealth Group, Kaiser Foundation, and Anthem, in order, with Aetna, Centene, Cigna, Humana and HCSC also always being in the top ten each year. While the top three had strong underwriting performance, their share of all enrollment dropped from 33% in 2011 to 30% in 2016. The great majority of all health plans are pretty small and these smaller plans have worse underwriting performance. The study did not examine performance by line of business, but I strongly suspect that the individual business is driving the lower underwriting margins. I would guess that group performance is about the same, Medicare performance improved slightly and Medicaid performance declined slightly. Overall, for the top dogs life looks good and for others it is a dog-eat-dog world.
