News and Commentary

Most provider-owned health plans weather economic downturn

Although almost all businesses were touched by the slowdown, some weathered the recession better than others. In particular, large health insurers flush with cash had been buying up regional provider-owned plans — but that buying spree is slowing down, says A.M. Best, the credit rating company.

The company says that in the wake of health reform, there may be renewed interest by providers in creating or acquiring health plans. (See also the interview with Jeff Goldsmith, the consultant.)

A.M. Best says provider-owned plans have remained disciplined, with seven plans reporting a more favorable membership trend over the past five years than the rest of the industry and a relatively stable underwriting margin, except for the decrease in 2009. A.M. Best says these regional provider-owned plans focused on spending reductions and controlled growth. Profit margins for industry-owned plans dropped 11 percent from 2007 to 2008, more than their provider-owned counterparts. The company says industry-owned plans usually have riskier investments and experienced larger realized losses.

Provider-owned health plans — underwriting and profit margins (%)

Source: A.M. Best’s Special Report. “Segment under pressure; but may see renewed interest.” September 2010

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