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Health insurance is a big unknown for millions of Americans as the new healthcare bill is being drafted for the Senate approval. In the meantime, some of the largest health insurers are just as conflicted.
Two weeks ago, Anthem announced its exit from the health insurance markets in Wisconsin and its home state of Indiana.
Anthem joins other insurers leaving the exchange as it struggles to come up with premium rates with the fate of the new law unknown. Last week, Wellmark announced that it would be re-entering the New Jersey market.
The latest data show that 835 individual insurance companies made a $7.48 billion profit in 2016. A handful of the most-profitable companies belonged to groups that plan on leaving, or that have already left, the individual health exchange market.
The top ten most profitable health insurers in 2016 included companies from well-known groups such as Humana, Anthem, and United Health.
To give you some numbers, I looked at the 2016 bottom line for all health insurance companies that wrote new health insurance policies.
The top spot, with $552.8 million in net income, went to “B-” rated Blue Cross & Blue Shield of Florida. Its parent company, Guidewell Mutual Holding Corp., is not publicly traded and therefore has no ticker in the table below.
In second place was Humana Insurance Co (WI), with an “A-” Safety rating and $506.1 million in profits.
Third came Sierra Health & Life Ins Co., rated “B” by Weiss.
2016 Biggest Winners
As you can see in the table above, Humana and Anthem were represented equally each with three subsidiaries. United Health had two.
Together these ten companies accounted for 49% of profits made by all health insurers in 2016. They also increased their profits by $1.4 billion, or 63.7%, year-over-year.
Oxford Health Insurance Inc. was the only insurer on the list with a negative year-over-year change in profit.
Now that we identified some of the most profitable insurers, let’s take a look at the other end of the spectrum. The next table contains the ten health insurers with the largest losses in 2016. One of them is an Anthem company.
2016 Biggest Losers
So just like every year, some win and some lose. But the 2016 winners list is full of companies backed by major health insurance groups — and they’re still moving towards withdrawing from the Affordable Care market exchanges.
The bottom line is that the profitability of these insurers may not come from the policies generated from the exchanges.
Insurers tend to view (logically from a business perspective) that each line of business must be profitable. If each line is not profitable, then it is also logical they should not be offering that product.
The pressure for profitability in each line of business tends to be greater for insurers that are part of a group that is publicly traded on a stock exchange.
Or in other words, in the U.S., health care is a business not a social benefit.
Think Safety,
Gavin Magor
Insurance Insights Edition, By Gavin Magor, Senior Financial Analyst Gavin has more than 30 years of international experience in credit-risk management, commercial lending and insurance, banking and stock analysis and holds an MBA. Gavin oversees the Weiss ratings process, developing the methodology for Weiss’ Sovereign Debt and Global Bank Ratings. Gavin has appeared on both radio and television, including ABC and NBC as an expert in insurance, bank and stock ratings and has been quoted by CNBC, The New York Times, Los Angeles Times, and Reuters as well as several regional newspapers and trade media. |
