Provider-sponsored health plans continue to struggle

Boardroom
A new analysis from the Robert Wood Johnson Foundation finds a difficult environment and a poor outlook for provider-sponsored health insurance plans.

Despite incentives intended to make provider-owned insurance plans work, a new analysis shows the financial landscape continues to look dismal for such programs.

A report published by the Robert Wood Johnson Foundation found that of the 42 insurance companies created or acquired by provider systems since 2010, only four had reached profitability by 2015. Two more of the plans are currently up for sale, and five have gone out of business entirely, suggesting the current insurance environment “is not conducive to profitability for new provider-sponsored plans,” according to the report’s author, Allan Baumgarten.

After a rocky start, some industry watchers had hoped the changing healthcare landscape would create more fertile ground for hospital-owned health plans, since they offer an opportunity for better clinical alignment, FierceHealthcare previously reported. The latest research notes that provider systems have had difficulty aligning strategies for reduced costs with those geared toward increased quality. As a result, many have reportedly been cutting prices to gain market share at the expense of provider revenues, as opposed to increasing efficiency and value, according to the report.

Baumgarten also notes that plans have struggled to enroll enough patients to see benefits of economies of scale and improved risk management, with only eight of the plans studied insuring more than 25,000 individuals. Of those reaching enrollments over 100,000, however, the analysis found “almost all these plans continue to operate at a loss, in some cases reporting very large losses.”

Prospects for the future don’t look great either, according to the report. The American Health Care Act contemplates reduced insurance subsidies and potential cuts to Medicaid spending that could generate new opportunities for insurers, the report notes. Given the likelihood of continuing uncertainty and the potential for healthy individuals to leave the market, diluting existing risk pools further, insurers face enough risks for the report to conclude the chances of success for provider-sponsored insurance plans are not very high in the near term.