Track athletes legs at the start of a race, provider sponsored heath plans


Provider-sponsored health plans

Positioned to win the health insurance market shift

Spurred by the launch of health insurance marketplaces and the transition to value-based care, many health systems are developing strategies to establish or expand their own health plans. Will the recent financial success of provider-sponsored plans (PSPs) help to drive growth for this emerging model of care? A new report by the Deloitte Center for Health Solutions details the recent financial and market performance of PSPs.

Are PSPs a better model of care?

Deloitte's Center for Health Solutions sought to understand how PSPs performed financially in recent times. We analyzed the financial and market performance of provider-sponsored managed care organizations (MCOs) during 2012–2014.

The two parts of our analysis included:
  1. Financial benchmarking to identify top financially performing PSPs and benchmark their performance across lines of business (Medicare Advantage, Medicaid, and commercial) and against other health plans operating in the same states as the top PSPs.
  2. Regression analysis to understand factors associated with profitability.

Primary findings

Our analysis yielded three primary findings:

PSPs can be financially successful Core line of businessi (LOB) can influence profitability Scale and tenure can boost profitability

Top financially performing PSPs, on average, improved their underwriting margin from 2.4 percent in 2012 to 2.6 percent in 2014. Other health plans operating in the same states as the top PSPs lost money, on average, with an underwriting margin of -0.8 percent in 2014.

Medicare Advantage-focused PSPs performed well financially in 2012 and 2013. In 2014, the trend shifted towards Medicaid-focused PSPs, likely due to Medicaid expansion and lower utilization rates, as well as Medicare Advantage federal payment rate retrenchment. Five of the top 10 financially performing PSPs in 2014 were Medicaid-focused.

Longer-tenured health plans and those with greater market share and larger enrollment have higher profitability. Many of the top financially performing PSPs have sizeable enrollment (>100,000) in their core LOB.

We also analyzed the concentration of PSP activity across the states, finding that about half of the states have PSPs that, together, have at least 5 percent of total health plan enrollees. Five states have PSPs with at least 20 percent of health plan enrollees.

With market dynamics supporting the transition to more efficient and effective health care financing and delivery, PSPs recent financial success may help to drive growth for the integrated health care financing and care delivery model.

i An MCO’s core LOB is the LOB with the greatest enrollment share as a percentage of the MCO’s total enrollment.

sponsored plans, athletes on track

Putting a plan into action

Many health care providers are weighing a move into the health plan space. Already, there are more than 220 provider-sponsored plans in the United States—and they represent less than 10 percent of the market—so many more are likely to follow. However, few of these pioneers are leveraging the full potential of the integrated health care financing and care delivery model.

With competitive assets unmatched by other health plans, PSPs could mount a formidable challenge to health plan market leaders provided they are able to achieve sufficient scale and manage a population’s specific needs.

Learn more about Deloitte’s provider health plan integration solution

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