It's Been A Good Year So Far For Health Insurers

Oregon's largest commercial health insurers racked up solid profits through the first half of 2019, as they took advantage of a brief reprieve from an Affordable Care Act fee that has cost them millions of dollars in past years.

The five largest insurers in Oregon's commercial market – Kaiser Foundation Health Plan of the Northwest, Providence Health Plan, Regence BlueCross BlueShield of Oregon, Moda Health Plan and PacficSource Health Plans – notched higher underwriting profits in the first six months of the year compared to the same period in 2018, recent financial filings with the National Association of Insurance Commissioners show.

Yet the second-quarter reports painted somewhat of a mixed picture. After all five large commercial insurers recorded massive turnarounds in the first quarter of 2019, four of the five slid back in the second quarter. The exception was Providence, which saw profits rise from $4.7 million to $21.4 million.

Two much smaller commercial insurers, BridgeSpan Health Co. and Health Net Health Plan of Oregon, are in worse financial shape than last year. BridgeSpan's underwriting profits fell from $5.1 million to $2 million, while Health Net's losses rose from $5.4 million to $8.6 million.

Yet all five large insurers appear to be on more solid financial footing through this year’s midpoint than last year. And in the case of Kaiser, the largest insurer by enrollment, the difference between the two years has been staggering.

Kaiser recorded more than $68 million in underwriting profits – the difference between its revenue earned from premiums and expenses from claims and other sources – through the first half of this year. At the midway point in 2018, Kaiser had lost $7 million.

A one-year suspension of the Affordable Care Act's health insurance provider fee for 2019 explains some of the turnaround. Implemented in 2014 to fund the ACA's state and federal health care exchanges, it cost the insurers between $13 and $40 million last year. Kaiser paid more than $36 million last year, its filings show. 

But Kaiser's soaring profits also appear to be driven by an increasing share of Oregon's commercial market. The insurer added more than 12,000 new policyholders in first quarter of the year, according to the most recent figures from the Oregon Department of Consumer and Business Services.

That was the largest gain among all insurers except for PacificSource, which added 16,000 new members. But PacficSource's fortunes haven't followed Kaiser's.

PacificSource's underwriting profits rose from $13.4 million in mid-2018 to $14.1 million halfway through this year, according to its financial filings. The filings show PacificSource with a larger volume of claims unpaid for one to 60 days than Kaiser, despite Kaiser having more than three times as many commercial policyholders as PacificSource.

Regence has been another standout this year. The insurer recorded $49.1 million in underwriting profits through the first six months of the year, up from $29.7 million last year. It has also seen a slight enrollment uptick.

Moda Health recorded a small profit just shy of $1 million in the first half of the year. But that amounts to a massive improvement from its $10.2 million loss through June of last year – a figure that ballooned to $249 million by the end of 2018.

Moda has been on rocky financial footing for years, posting negative net incomes from 2014 to 2016. Those struggles, which the company blamed on Republican cuts to the ACA's risk corridor reimbursements, led the state of Oregon to consider a takeover of the company in 2016. But Moda raised just enough capital to fend the state off. Moda and other insurers sued the federal government over the risk corridor payments, in a case the U.S. Supreme Court has agreed to hear.

Meanwhile, Delta Dental of California swooped in late last year with a $152 million investment in Moda, giving it a 49.5 ownership stake in the Oregon company. Regulators approved the deal in February.

The investment throws Moda a crucial lifeline, with insurers expected to be back on the hook for millions of dollars in health insurance provider fees next year.

Kaiser has racked up such tidy profits in 2019 that it has already put $20 million aside in anticipation of paying the fees next year, its filings show.

Yet insurers signaled confidence in May when they proposed far smaller premium increases for 2020 than in previous years. Insurers offering small group plans requested a rise of 8.7 percent in rates for next year, while individual market insurers requested a 3.3 percent increase.

Those insurers had typically requested double-digit premium hikes in past years.

The state Division of Financial Regulation last month approved even smaller increases: 7.1 percent on average for small group plans and 1.5 percent for individuals.

You can reach Elon Glucklich at [email protected].

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