October 23, 2012
Commenting on Medicaid plan Centene Corp. (St. Louis), which reported an 87% decline in third-quarter profits largely because of poor financial results in Kentucky:
Centene’s third quarter results provide a vivid example of how outsized membership growth can often lead to severe margin challenges if the business is not appropriately priced.
October 23, 2012
In the market for a Medicaid plan? D.C. Chartered Health Plan, which is the largest Medicaid plan in Washington, DC, with 110,000 members, has been placed in receivership by District insurance regulators pending a sale of the company.
The proximate cause: failure to meet a 90-day deadline issued by the DC Dept. of Insurance in June instructing the company to raise capital or find a buyer in light of a 2011 loss of $15 million.
It probably doesn’t help that the home of D.C. Chartered’s owner Jeffrey Thompson was raided by federal agents in April as part of a city campaign finance investigation. Furthermore, an ongoing audit of D.C. Chartered’s books has turned up financial irregularities. In short, what we have here is a mess.
Regulators say there will be no interruption to coverage for plan members. D.C. Chartered’s five-year Medicaid contract with the district expires in 2013, when the district expects to have completed a rebid for the entire contract. Other Medicaid plans serving D.C. include UnitedHealth and MedStar.
October 17, 2012
UnitedHealth Group (Minnetonka, MN) has posted blow-out third-quarter financial results. But the big news is the company lowered its full-year 2012 medical cost trend projection to between 5% and 6%–a 50 basis point reduction from its prior expectation. UnitedHealth chief financial officer Dan Schumacher summed it up during a conference call with investors.
Stepping into 2012, we did have an expectation of higher utilization as compared to 2011. We are actually seeing that, although I will tell you it is more moderate than we thought. We saw a surge in the first quarter utilization, and then that moderated from the second quarter forward….We are seeing a little better inpatient….We are seeing a little bit more moderate pharmacy utilization, particularly in the space of Hep C….Outpatient is actually a little bit higher than our expectation.
The company continues to expect commercial risk membership to be down as it maintains pricing discipline in a competitive marketplace, officials say. Commercial risk gross margin will also feel the squeeze.
October 15, 2012
Solid analysis from Citi showing commercial risk health plans posted a combined medical cost ratio of 84.2% in 2011. MCR in the small group market was better than average at 79.9%, while individual came in at 80.6%, and large group was the highest at 86.2%.
The plans in the analysis represent about 60 million members in 25 states and account for $260 billion in annual premiums. Combined underwriting margin was 2.6% in 2011 for commercial risk plans. Citi warns, however:
We don’t really buy the underwriting margins reported by the plans. For example, in the small group product, the plans reported an overall MLR of less than 80%, and an underwriting margin of only 3%, which doesn’t make sense. The issue is probably that many plans don’t report true SG&A in the stat filings, but rather, a management fee that is paid to the parent company.