AM Best

A.M. Best Special Report: Provider-Owned Plans Fare Well In Wake of the Patient Protection and Affordable Care Act


Jennifer Afriyie
Financial Analyst
(908) 439-2200, ext. 5203

Joseph Zazzera, MBA
Assistant Vice President
(908) 439-2200, ext. 5797
Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644


OLDWICK - MARCH 02, 2015 11:59 AM (EST)
Although the health insurance industry has experienced significant headwinds in recent years with the slow economic recovery and sweeping changes in the health care environment due to the implementation of the Patient Protection and Affordable Care Act (ACA), provider-owned plans have been able to keep up with the rest of the industry in terms of membership expansion, profitable premium growth and risk-adjusted capitalization, according to a new A.M. Best special report.

The Best's Special Report, titled, "Provider-Owned Plans Fare Well In Wake of the Patient Protection and Affordable Care Act," states that provider-owned plans encompass regional provider-owned, -sponsored and -founded health plans. While A.M. Best had previously indicated that the provider-owned health plan segment could see renewed interest, it appears providers and carriers alike have sought other options besides buy/build and there is now a significant health care focus on alignment.

In 2014, the ACA brought with it a flood of regulatory and environmental changes; nevertheless, the industry has stood strong; and national, regional and local plans were able for the most part to successfully manage through the implementation and execution of strategies designed for the new landscape. A few instances of financial issues were experienced by smaller local carriers due to excessive growth, mispricing and/or earnings and capitalization concerns. However, these were in the minority, and for 2014, A.M. Best has again reported more ratings affirmations and upgrades than downgrades in the health sector. While results have fluctuated on a year-over-year basis, provider-owned plans in this study reported favorable trends in aggregate and have fared even better in some metrics than some of their industry peers.

In 2013, provider-owned plans in this study saw:

  • Premium revenue grow 5.5%; a faster pace than that of the health industry.

  • Generally stable expenditure development; leveraging off their strategic ownership structures and favorable contracting agreements.

  • Underwriting margins fluctuate widely, with overall margins declining to 1.9% in 2013 from 2.5% in 2009, with a notable spike in the interim in 2011.

  • Overall profit margins stabilize and flatten in the past five years, with a slight upward trend reported through 2013 across the provider-owned plan population. The overall industry has showed a small decline.

  • Unemployment's impact primarily in the commercial product segment with provider-owned health plans' enrollment decreasing by nearly 4% in 2013, but less than 1% in the past three years. Enrollment into the latter part of 2014 was significant, as expected, and largely driven by individual enrollment in the health care marketplaces. Government-funded programs saw favorable membership development as more individuals became eligible for Medicare and Medicaid.

For a full copy of this special report, please visit: .

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