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Shifting sources of revenue

Health insurers are experiencing a shift in the sources of revenue, with factors like the downturn in the economy and the changing demographics of members playing a major role, according to a report from Mark Farrah Associates, an aggregator and publisher of health plan market data. The report says U.S. health plan revenues totaled $370.8 billion for 2009, up from $346.1 billion (7.2 percent) in 2008. But comprehensive commercial coverage as a percentage of total revenue has fallen from 59 percent in 2006 to 51 percent in 2009, the last year data were available.

So where is this revenue change coming from? Medicare and Medicaid, according to the report. Managed Medicare now accounts for 21 percent of health plan total revenues, up 16 percent from 2006. Revenue from state Medicaid plans also grew as a percentage of total revenue from 10 percent in 2006 to 14 percent in 2009, a consequence of current economic conditions and a result of more states moving toward managed care to insure low-income residents.

Health plans’ sources of revenue, 2009

Commercial 50.8%
Managed Medicare 21.1%
Managed Medicaid 13.6%
Federal Employees Health Benefit Plan 7.3%
Dental only 2.1%
Medicare supplement 2.0%
Vision only 0.4%
Other health 2.6%

Source: Mark Farrah Associates. “Health Plans See Revenue Shift Away From Commercial,” May 2010

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