A.M. Best: ‘U.S. Government-Related Health Insurance Business Continues to Grow’

A.M. Best, August 13, 2018

The U.S. health insurance industry’s premium composition is increasingly shifting toward government-sponsored business, which exposes carriers to additional risks as the business is generally low-margin and results in a greater reliance on state and federal funding, according to a new A.M. Best report.

The Best’s Market Segment Report, “Government-Related Health Insurance Business Continues to Grow Despite Risks,” states that the health industry is generating an increasingly large share of premium from Medicare Advantage, Medicaid and individual commercial businesses. Medicaid reported the largest increase in net premiums written growth, to $224.0 billion in 2017 from $43.1 billion in 2007, owing to Medicaid expansion under the Affordable Care Act (ACA), and to more states turning to managed care to run traditional, pre-expansion Medicaid programs. Medicaid’s share of total industry NPW (Net Premiums Written) in that timeframe rose to 27.1% from 10.2%, although much of that growth occurred in 2014-2015. Medicare Advantage also has been a major source of premium growth for health insurers, with NPW increasing to $202.7 billion in 2017, representing 24.5% of overall industry premium, from $69.9 billion in 2007. Like Medicaid, growth in this business has flattened over the past few years.

According to the report, changes in the nature and financing of the individual market under the ACA have effectively turned this portion of the commercial market into government-sponsored business. At the same time, group commercial premium since 2014 has experienced lower growth because of relatively stable medical cost trends, the absence of material membership expansion and the transition to self-funded arrangements. As a result, many commercial carriers have a greater exposure to government-financed business without having increased their participation in Medicaid or Medicare Advantage lines. Increased exposure to the individual exchange business and its financial losses led to a decline in underwriting margins in the commercial segment from 2014 to 2016, but the market recovered in 2017, leading to historically high results for the overall commercial segment.

With health care remaining a controversial political issue, the regulatory regime is likely to remain volatile over the near to medium term, especially as it relates to the individual exchange segment.

As industry consolidation continues and as companies build massive operational infrastructures to service these programs, a quick exit, if need be, may be more difficult. However, the larger carriers, as well as some of the midsize ones, have been successful in adjusting to regulatory changes and revising business models to accommodate different population needs under the government programs.

https://news.ambest.com…

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Comment:

By Don McCanne, M.D.

This sterile report from A.M. Best suggests that there are uncertainties for the health insurance industry in its participation in government programs, but the important message is that their government-related health insurance business is growing as they prove capable of accommodating to regulatory volatility.

The clear trend is further privatization of the government health insurance programs. With the strong public support for Medicare for All, the insurance industry realizes that there is a great opportunity to expand their markets though the public option of a private Medicare Advantage for All. If you listen carefully to the political candidates supporting Medicare for All, many of them slip in “through a public option,” simply meaning a private insurance option with a Medicare label. That’s what Medicare Advantage is.

Listen up. As we attempt to insert ourselves into the process again (we failed during the Clinton and the Obama administrations), we are going to be met with, “We got it; now get out of our way.” The incremental step of Medicare Advantage for All will ensure a solid rock foundation shoring up the medical-industrial complex, likely for decades to come.

We’re very good at inertia, and it is going to kill any semblance of a single payer, publicly-administered Medicare for all, as we perceive it. Are you just going to sit there? Are all of us just going to sit here?

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