Although Massachusetts health reform has helped increase the number of insured people, it doesn't seem to be aiding insurers' bottom lines as the state's major insurance companies saw their second quarter earnings plummet for the second straight quarter.
The state's largest insurer, Blue Cross Blue Shield of Massachusetts, reported a 49.9 percent drop in second quarter net income. And the state's three other major insurers saw even sharper declines--56.3 percent at Harvard Pilgrim Health Care, 93.6 percent at Tufts Health Plan and 68.4 percent at Fallon Community Health Plan, reported The Boston Globe.
In announcing quarterly earnings, the insurers pointed to mounting pressure from small businesses and state officials to limit premium increases. In fact, the Massachusetts insurers can only increase premiums for plans covering small businesses and self-employed individuals by an average 2.3 percent, the smallest hike in the state in the past 10 years, FierceHealthPayer previously reported.
Another cause for the insurers' markedly low earnings is a rising shortage of primary care providers. "In Massachusetts, the average wait to see a new primary care physician is about two months, while for the rest of the nation, the average is just under three weeks," Vera Tice, managing director of the Healthcare Delivery Institute at Worcester Polytechnic Institute, told GoLocal Worcester.
And since the state insurance market is more competitive with companies launching new cost-cutting health plans with narrow networks, some healthcare experts worry insurers' profits will continue to drop. "It's a serious concern," Josh Archambault, director of health care policy for research group Pioneer Institute, told the Globe. "We're in a situation where state and federal governments are dictating to the insurers what the market should be. If this trend continues and health care utilization rises, whether they'll be able to make money is up for grabs."
Despite the concerns, though, Blue Cross said its low second-quarter net income isn't that significant. "We're going to end the year at about the same place as last year," said Allen Maltz, chief financial officer at Blue Cross Blue Shield. "You can't make too much of a given quarter."
Blue Cross also reported its premium revenue and membership held steady at $1.6 billion and 2.8 million, respectively. Harvard Pilgrim earned $5.9 million in net income during the quarter, compared to last year's $13.5 million, despite adding 29,000 new members. Likewise, Tufts' net income decreased to $2.3 million while its membership increased by 234,000 people. And Fallon recorded a net income of $4.3 million, but added only 600 new members, according to the Worcester Telegram.