In the wake of healthcare reform, provider-owned health plans are under financial pressure, but a new study indicates providers are still interested in creating or acquiring health plans.
An analysis by the Oldwick, N.J.-based credit rating firm A. M. Best suggests that healthcare provider organizations are seeking ways to improve coordination of care and align reimbursement with local market needs.
Ownership of health insurance plans would support these goals, although there are economic challenges to be overcome before this becomes an industry trend.
Over the past decade, larger national health plans have acquired some regional provider-owned plans to gain membership in target markets and more favorable provider contracts. But the study notes that this trend has recently slowed.
Profit margins at provider-owned plans have been on a two-year decline and in 2009 reached the lowest margin in four years, at nearly 1.4 percent, after a two-year upward trend that hit a high of 3.3 percent in 2007.
About half of all provider-owned plans are local not-for-profit companies, which had pressure from regulators to limit their profit margins between 2 percent and 3 percent.
Provider plans' underwriting margin dropped significantly – to just more than 1 percent – after holding steady at more than 2 percent since 2007. In contrast, the total industry realized about a 2 percent margin in 2009, down from a 3.9 percent margin in 2007.
The Best report shows that the impact of unemployment can be seen in the commercial product market. Plan membership has decreased 5.5 percent for provider-owned plans since 2007. And while unemployment negatively impacted commercial enrollment, it has positively affected Medicaid enrollment as more individuals became eligible for Medicaid benefits. As a result, Medicaid membership has increased approximately 29 percent since 2007.