Washington Health Plans Incur Heavy Losses in the First Quarter of 2014
By David Peel
Publisher and Editor
Washington Healthcare News
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Original Publish Date: June 10, 2014
Fourteen of the largest domestic health plans in Washington State recently filed financial reports for the three months ended March 31, 2014 and the results were disappointing with twelve plans reporting a net loss. Of additional concern is that only two plans reported a loss in the same quarter a year earlier.
These figures represent only one quarter. However, it’s the first quarter associated with full implementation of the Affordable Care Act.
The first page of our report highlights financial results and shows member months (the combined total of month ending membership for each three month period), total revenues, net underwriting gain (loss), investment gain (loss), net income (loss) and statutory capital.
The second page of our report presents key financial statistics. When the financial figures on the first page are divided by member months, a monthly average is obtained that is valuable in comparing one plan to another. These “per member per month” averages are presented in the middle section of the page.
Finally, we present statutory capital per average member in the right hand section of the second page of our report. This is essentially the amount of “cushion” on a per member basis a company has available to cover inadequate cost estimates. Alternatively, this is the liquidating value of the company per average insured person.
As you review the numbers, keep in mind there are differences in the type of membership each plan serves.
All information in this report was obtained through publicly available reports filed with the Washington State Office of Insurance Commissioner (OIC). Information not required to be filed with the OIC (self-insured and some insured business from smaller, non-domestic carriers) is not included in this report nor is it referenced in this article.
Comments from Industry Representatives
We asked representatives of the plans to provide insight into their financial results. Some plans chose not to reply to our request, didn’t comment or didn’t get back to us within the requested deadline. However, others provided valuable comments and these follow, sorted by plan size in descending order.
Premera Blue Cross (includes LifeWise HP of WA)
Premera reported a net loss of $23.3 million in the first quarter of 2014 compared to a profit of $24.9 million in the first quarter of 2013.
LifeWise HP of WA reported a net loss of $6.2 million in the first quarter of 2014 compared to a profit of $2.8 million in the first quarter of 2013.
Spokesperson Eric Earling said, “Our losses for both companies were the result of ACA implementation costs and an increase in medical claims. The increase in medical claims comes from natural fluctuations and, potentially, pent-up demand from incoming individual customers.”
Group Health (includes Group Health Cooperative and Group Health Options)
Group Health Cooperative reported net income of $95.3 million for the first quarter of 2014 compared to net income of $56.9 for the first quarter of 2013. Group Health was one of the two plans that reported a profit.
Group Health Options (GHO) reported a net loss of $8.7 million for the first quarter of 2014 compared to net income of $2.7 million during the first quarter of 2013.
Group Health attributed their improved financial results to operational efficiencies. Spokesperson Ed Boyle said, “Group Health is pleased with the organization’s ongoing cost-repositioning work from last year, which has been reported in the media, and focused on continuing to offer consumers high-quality care and coverage at market-competitive prices. This work will continue and we’re excited about the positive benefits it is – and will continue – providing the more than 600,000 members Group Health serves throughout Washington state.”
Regence (includes Asuris NW Health)
Regence reported a net loss of $30.9 million in the first quarter of 2014 compared to a profit of $14.3 million in the first quarter of 2013. Asuris NW Health reported a net loss of $3.8 million in the first quarter of 2014 compared to a profit of $2.3 million in the first quarter of 2013.
Spokesperson Rachelle Cunningham said, “The biggest contributor to the year-over-year change in financial performance across all plans was the statutory accounting requirement that the entire insurer fee payable in September 2014 be expensed in January 2014. The result was much higher operating expenses, lower underwriting and net results.”
Cunningham continued, “For Regence BlueShield, 2014 results were negatively impacted by 2013 claims coming in higher than expected likely due to a rush on benefits in the fourth quarter prior to ACA implementation; as well as a drop in enrollment, which was expected since Regence chose not to participate on the state Exchange. This membership decline also impacted results for Asuris.”
Concluding Comments
ACA implementation has resulted in additional costs that will ultimately be paid by plan customers and taxpayers. Whether these costs will be offset by cost efficiencies and enrollment gains is yet to be known.
Our next financial report will cover the six months ended June 30, 2014 compared to the six months ended June 30, 2013.
David Peel can be reached at dpeel@healthcarenewssite.com or 425-577-1334.