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Provider-sponsored plans: Financial success may drive growth

Hospital-led plans could increase competition in health plan marketplace

The recent financial success of provider-sponsored health plans (PSPs) have led many health systems to think about developing strategies to establish or expand their own health plans. Despite an overall low representation in the healthcare market, the PSPs may help to drive growth for the integrated healthcare financing and care delivery model, according to a new report from Deloitte's Center for Health Solutions.

The report, "Provider-Health Plan Integration: Using health care financing as the catalyst for innovation," analyzed the financial and market performance of provider-sponsored managed care organizations from 2012 to 2014. The analysis used financial benchmarking to identify top financially performing PSPs to track their performance across lines of business against other health plans operating in the same states in order to understand the factors that are related to profitability.

The report outlines three key findings:

  • PSPs can be financially successful: Top financially performing PSPs, on average, improved their underwriting margin from 2.4 percent in 2012 to 2.6 percent in 2014, compared to other health plans that operated in the same states, which lost money with a margin of -0.8 percent in 2014.
  • Core line of business can influence profitability: Five of the top 10 financially performing PSPs in 2014 were Medicaid-focused. 
  • Scale and tenure can boost profitability: Longer-tenured health plans and those with greater market share and larger enrollment have higher profitability.

Now that healthcare is shifting to a consumer-driven industry, insurance executives are struggling to find a way to increase margins while making more money by doing less. The report states that insurers will have to establish increasingly efficient reimbursement models, which will "become more important in delivering sustained financial performance in a value-based environment," and that provider-health plan integration "can serve as an attractive option to secure sustained margins."

With providers making up 54 percent of recent Medicare Advantage plan entrants, PSPs could be a worthy challenger to health plan market leaders. As more Americans gain health coverage in 2016, there is increased pressure to make that coverage affordable, and health systems are more willing to take on the financial risk. Twenty-eight percent of hospitals are interested in launching their own plans by 2018, and even though PSPs are still rare--representing less than 10 percent of the total market--in some cases, plans offered by healthcare systems are the lowest-priced silver plans.

To learn more:
- read the Deloitte report

Related Articles:
Payers face more provider competition in the Medicare Advantage market
Provider-sponsored insurance plans can boost outcomes, credit
Provider-led health plans are still rare, but a growing number on insurance marketplaces
Provider-led health plans: Factors for success
Hospitals as insurers: Competition, costs and considerations [Special Report]