Missouri Health Plan Margins Double in Two Years
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Missouri Health Plan Margins Double in Two Years The nation’s four largest health plans posted strong profits on fully-insured plans in Missouri in 2018. Aggregate operating margins increased to 8.7%, a two-fold increase since 2016, while premium rates increased slightly faster than medical costs and enrollment decreased.1 Consistent with past years, the small group market segment was the most profitable. However, after years of losses, Missouri health plans saw positive operating margins in the individual market in 2018. 2 Financial results among carriers were mixed for the large employer business line. National Health Plans Commercial Insurers Earn Operating Margins, Strong Profits Nationally 2016 - 2018 Operating margins were 8.6% healthy at 8%, up from 7% CIGNA 9.4% in 2016 (see graph at right). 6.7% 7.7% Plans raised premiums on UnitedHealth 7.6% commercial coverage as Group 2018 7.0% enrollment declined and the National percentage of uninsured 7.0% Average people increased. Aetna 3.4% Operating 7.6% Margin Enrollment increases in Medicare Advantage and 5.9% 8.0% other government plans and Anthem 4.7% their growing portfolio of side 5.7% businesses were key drivers of profitability. 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 2018 2017 2016 Figure 1 : Form 10 - K Securities & Exchange Commission (SEC). Aetna data for 2018 obtained from SEC Form 10Q filed in September 2018, prior to acquisition by CVS Health. National average operating margins obtained from CSI Markets. The medical loss ratio (MLR) is the percentage of premium spent on medical care. The ACA requires the MLR to be at least 80% for individual and small group plans and 85% for large groups. If medical expenditures fall below this amount, plans must rebate the difference to the customer. Missouri ranked 10 th in the nation in 2018 for rebates required by the Affordable Care Act (ACA), as carriers reimbursed customers $52 million on fully-insured plans, a nearly four-fold increase since 2016. For the second consecutive year, Anthem, UnitedHealthcare, and Aetna paid rebates to local individual and small group customers. Compared to other lines of coverage, small group plans had the lowest MLRs and received more than half of the rebates. Anthem paid $37.7 million in rebates in 2018, up slightly from 2017, and the largest of any insurer in Missouri. This translates to an average of $263 per customer across individual and small groups, compared to $162 nationally. Nationally, rebates increased to $1.3 billion in 2018, the largest amount of rebates paid to customers since the MLR requirement was first implemented in 2012. Insurers paid individual plans the largest share of rebates ($769 million). Premiums increased 26% and were likely overpriced due to insurer uncertainty over repeal of the individual mandate and cost-sharing subsidies.3 Missouri premium increases were larger. In 2018, carriers’ average premiums for individual plans spiked 44%, and small group plans increased 16%, the fastest growth in eight years.4 In 2018, the majority (70%) of Missourians were enrolled in private health plans, according to data from the Missouri Department of Commerce & Insurance. The majority (64%) of those with private coverage were insured through an employer, and more than half of employers were self-insured. Health benefits costs for Missouri workers increased by two to 10 times the growth rate of average compensation in the past decade.5 In addition to lower wages, workers bear these costs through premium contributions, point-of-care payments, reduced retirement benefits, higher taxes, and inflated prices due to imbedded health care costs in other goods and services. Are insurers doing enough to stem health care inflation and drive better health outcomes? Employers and consumers rely on health plans to negotiate with providers to deliver quality care at a fair price, whether the plan is fully-insured or self-insured. Overall, hospital costs are the largest share of medical expenses. Yet, until this year, little has been known about commercial plan payments for hospital services. A national study from the RAND Corporation found two- to three-fold differences between Medicare and commercial plan payments to hospitals.6 Medicare payments are assumed to be the right payment for an efficient hospital, as they are adjusted for the severity of patients’ diagnoses and hospitals’ geographic locations. Nationally, researchers said reducing hospital prices to Medicare rates would decrease spending by approximately $7.7 billion for the employer populations included in the study. Key findings from the RAND report include: On average, case mix–adjusted hospital prices for commercial health plans were 241% of what Medicare paid in 2017 and varied widely across hospitals nationally. Missouri was in the middle range at 221%. Plans paid hospitals considerably more for outpatient services compared to inpatient in 17 out of 25 states, including Missouri. Michigan, Kentucky, New York, and Pennsylvania were low payment states at 150% to 200% of Medicare. High payment states included Colorado, Illinois, Maine, Montana, Wisconsin, and Wyoming, at 250% to over 300% of Medicare. Health plans have the ability to pass higher prices on to employers and enrollees.7 In Missouri, health benefits costs have increased in part because prices paid by private health plans are higher and growing faster than Medicare, as the RAND study shows. Closing Thoughts While well intended, the ACA MLR limits on allowable administrative expense and profit may be too favorable. Automation has helped reduce administrative expenses, which do not rise as steeply as medical costs. Health plan stock prices have grown roughly three times faster than the S&P 500 over the past five years, despite flat or declining commercial enrollment. Quality results have remained flat or decreased, while in aggregate, plan medical costs grew 7.5% each of the last two years, signaling another decline in value. Despite some individual plan improvements, overall quality remains well below the top 10% of plans nationally. Insurers’ Medicare Advantage plans continue to achieve better quality results as compared to their private plan offerings. Local insurers have developed value-based provider payments for their commercial plans, aimed at delivering better quality at a lower cost. Yet, uptake in the St. Louis region has been slow. Commercial plans should act to align provider reimbursement to a percentage of Medicare payments, with the explicit goal of narrowing the gap between the two. After all, the region’s working population is younger with fewer complex chronic conditions than the Medicare population. Clear and compelling incentives are needed to reward measureable improvements in quality and affordability. Reducing income inequity and sustaining the standard of living for American families depends on it.8 Source Notes 1,2 Department of Health and Human Services, Center for Consumer Information and Insurance Oversight. 3 C Cox, et al “Individual Insurance Market Performance in 2018,” Kaiser Family Foundation, May 7, 2019. 4 Missouri Health Insurance Market Report, Missouri Department Commerce & Insurance, October 2019. 5 Agency for Healthcare Research and Quality, Bureau of Labor Statistics. 6 C White, et al, “Prices Paid to Hospitals by Private Health Plans Are High Relative to Medicare and Vary Widely,” Rand Corporation, 2019. 7 G Sachdev, C White, G Bai, “Self-Insured Employers Are Using Price Transparency To Improve Contracting With Health Care Providers: The Indiana Experience,” Health Affairs, October 7, 2019. 8 S Schieber, S Nyce, “A Cancer on the American Dream,” Health Care USA, September (2018). Data Limitation and Cautions BHC has made every effort to provide accurate information. Each health plan was given the opportunity to verify its data. As with any analysis of industry data, a note of caution is advised. BHC depends upon the accuracy of the data sources and cannot guarantee the complete accuracy of all the data in this report. For example, NCQA Quality Compass data may not always report rates from year to year, and rates may also be affected by small sample sizes. In this case, data inaccuracies that may remain for individual health plans would have minimal impact on weighted average values and virtually no impact on the overall conclusions. Please read the technical discussion while reviewing or interpreting the data detailed in this report. BHC would like to acknowledge health plan representatives and staff who provided information and worked extensively to verify the accuracy of the data, which was invaluable to the project’s success. BHC would like to thank its members who provide funding to the BHC Foundation to make this publication possible. Employer Members AAF International Emmaus Homes Special School District of St. Aegion Corporation Enterprise Bank & Trust Louis County Alpha Packaging ESCO Technologies Inc. Spire Inc. Ameren Corporation Ferguson-Florissant School District Sulzer US Holding, Inc. Anheuser-Busch Companies, LLC First Busey Corporation Sunnen Products Company Arch Coal, Inc. Francis Howell School District Tucson Electric Power Barry-Wehmiller Companies, Inc. Global Brass and Copper, Inc. UniGroup, Inc. Bass Pro Shops, Inc. Graybar Electric Company, Inc. Watlow Bayer Laird Technologies, Inc. WestRock Co. Bi-State Development/Metro Maines Paper & Food Service, Inc. World Wide Technology, LLC The Boeing Company McCarthy Holdings Inc. Sustaining Members Bunzl Distribution USA, Inc. MilliporeSigma Aon Caleres