A.M. Best Special Report: Segment Under Pressure; But May See Renewed Interest

OLDWICK, N.J.--(BUSINESS WIRE)-- The once plentiful population of health plans owned by hospitals, physician groups or integrated health care delivery systems has diminished steadily over the past decade. During that period, we have seen larger national health plans—more flush with cash—acquiring some regional provider-owned plans in order to gain membership in target markets and more favorable provider contracts. However, this trend has recently slowed. In the wake of health care reform, A.M. Best Co. believes as the health care community seeks ways to improve coordination of care, reimbursement and understanding of local market needs, there may be a renewed interest by providers to create or acquire health plans.

In 2009, for the provider-owned plans in this study:

  • Underwriting margin dropped significantly—to just over 1%—after holding steady at over 2% since 2007. This is compared with that of the total industry, which realized about a 2% margin in 2009, down from a 3.9% margin in 2007.
  • Profit margin has been on a two year decline and reached the lowest margin in four years, at nearly 1.4% in 2009, after a two year upward trend that hit a high of 3.3% in 2007.
  • About half the provider-owned plans are local not-for-profit companies, which had pressure from regulators to limit their profit margins between 2% to 3%.
  • Risk-based capital, on a company action level basis, had a slight decline measuring 236.9 for year-end 2009, compared with 239.7 in 2007.
  • The unemployment impact can be seen in the commercial product market. Membership decreased 5.5% 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 increased approximately 29% since 2007.

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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.


A.M. Best
Jason Hopper
Financial Analyst
908-439-2200, ext. 5016
[email protected]
Joseph Zazzera
Managing Senior, Financial Analyst
908-439-2200, ext. 5797
[email protected]
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
[email protected]
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644
[email protected]

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