Largest public health plans show declining at-risk business

United Healthcare, Anthem, Centene, Humana, Aetna (CVS Health) and Cigna are America’s 6 largest publicly traded health insurers who covered approximately 180 million Americans in 2021 or 55% of the total US population. However increasingly their revenue mix, quality of service and types of services are changing as they battle the effects of COVID-19 and the changing dynamics of the healthcare market.

• Growth: 4 of 6 health plans saw double digit year over year growth in 2021 while Cigna saw a 3.4% decline in premium revenues. The story is equally bleak for Humana that has been declining its premium revenues for the last 3 years. Some of this was driven by consolidation in the industry with Centene acquiring Wellcare in 2020 and CVS Health acquiring Aetna in 2018. These inorganic changes have driven a reconfiguration of the product mix to better compete.
• At-risk vs. administrative services: One of the biggest change is the increased enrollment by self-insured employers that overtook at-risk enrollment in 2020. 60-75% of membership at 3 of the 6 health plans is attributed to administrative services for essentially self-insured employers. This is the clearest sign of health plan’s diluting value proposition.
• Member Loss Ratio (MLR): The expectation is that health plans spend 80%-85% of every premium dollar towards the healthcare of their membership (MLR). The Affordable Care Act (ACA) aka Obamacare has stringent MLR rules, however health plans find ways to dilute that requirement through creative reporting. While all 6 health plans in this report were in the optimum MLR range in 2021, driven mostly by the COVID-19 pandemic, their previous year performances have been inconsistent.

The Bottom Line: Poor health outcomes, escalating costs and market dynamics are accelerating pressure on health plans forcing them to consolidate businesses, diversify their revenues, and invest in digital health. Yet it is becoming clear that the value proposition of the traditional health plan is diluting rapidly as they struggle to meet the needs of the day.