Fully Insured Health Plans Saw Top Line Growth but Shrinking Profit Margins in the ACA Era, New Deloitte Study Reveals

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Dec 04, 2017, 09:20 ET

NEW YORK, Dec. 4, 2017 /PRNewswire/ -- As fully insured health plans emerge from six years of continued policy and market turbulence surrounding the Affordable Care Act (ACA), financial data analysis indicates a mixed financial performance. Two hundred and thirty-eight U.S. fully insured health plans experienced significant revenue increases over the past six years, though those gains were tempered by declining margins and growing underwriting losses. That was one of several important findings from a new "Health Plan Financial Trends 2011-2016" study by the Deloitte Center for Health Solutions. It is first of a series looking at the U.S. fully insured plans market.

"A key takeaway is: While the three largest plans accounted for a large portion of the total underwriting gain in the industry, there is a strikingly large number of smaller players with more challenging financials. They hover in the uncomfortable zone right around breaking even," said Greg Scott, principal, Deloitte Consulting LLP, and U.S. health plan leader.

Key findings
The Deloitte study found that fully insured health plan revenue increased 55 percent between 2011 and 2016, with enrollment also increasing from 143 million to 184 million members. But underwriting gains in 2016 were 29 percent below 2011 results.

The industry also saw a significant increase in the number of plans with annual losses, a steep decline in average margins, and widening performance variation among plans. These unfavorable trends emerged largely in 2014, the initial year of major coverage expansions under the ACA.

Another important discovery was that the largest national health plans captured a disproportionate, and growing, share of all underwriting gains. Their margin share was due in part to the number and magnitude of losses suffered by other health plans, particularly in ACA commercial individual products.

The study also found that for-profit health plans grew faster and posted significantly higher margins than not-for-profit health plans. For-profit plans saw revenue jump by 60 percent between 2011 and 2016, while not-for-profit plans had a revenue increase of 49 percent during the same period. For-profit plans had an average margin in 2016 of 2.5; the non-profit margin was 0.8 percent in 2016.

Lastly, the study revealed state insurance markets experienced increased volatility. There was a marked increase in the number and variety of states with unfavorable swings in insurance market performance, with the performance of health insurance markets in many states deteriorating significantly.

What's next
This fully insured health plan study is the first installment in a series of Deloitte reports on health plan financial trends. Future installments in this series will also examine government-sponsored health insurance market trends, as well as trends in the commercial group and commercial individual segments.

To access the first installment of this series, on overall fully insured health plan trends, please visit the Deloitte website.

About Deloitte
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SOURCE Deloitte