Humana's third-quarter earnings report underscores the fact health insurers are increasingly adjusting their strategies in the Affordable Care Act's individual marketplaces--and in many cases, offering fewer or more narrow plans.
The insurer announced Friday the "discontinuance of certain products as well as market exits for 2016, with approximately 100,000 current members expected to be impacted," though it notes most of these members will have other Humana plans to choose from. Humana says the move is driven mainly by the high benefit ratios associated with individual plans, which stems from product designs that attracted a higher-utilizing member base than it predicted when it priced its 2015 plans.
While the insurer says it has taken steps to improve the profitability of its individual commercial business, if deterioration in its claims experience continues that line of business will probably not be as profitable as expected. The company adds that it "continues to evaluate its participation" in the exchanges for 2017.
Humana is hardly the only insurer to retool its strategy in the individual market, as both Aetna and Anthem executives hinted at the challenges of operating in the exchanges during their respective earnings calls--though Aetna CEO Mark Bertolini noted that "it's way too early to call it quits on the ACA and on the exchanges." UnitedHealth, meanwhile, has transitioned from taking a cautious approach to the exchanges to expanding its offerings in the individual market.
Recent research from the Robert Wood Johnson Foundation points out that two-thirds of insurers are reducing or stopping their preferred provider organization (PPO) plan offerings in 2016. And a new analysis from Avalere echoes this finding, as it reports a 31 percent decline in the percentage of PPO plans on the exchanges from 2014 to 2016.
"The shift away from PPOs underscores the evolution of network design in exchange plans," Avalere Vice President Elizabeth Carpenter said in the report. "While network type is not a perfect way to predict network breadth, it is an indicator that exchange plans are moving toward networks with fewer providers."
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