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December 22, 2016 at 10:29 AM
Analysts at Standard & Poor’s Financial Services LLC have looked hard at the big individual major medical insurance issuers and detected a pulse.
Deep Banerjee and other analysts at the New York-based firm found signs of life in the financial reports of most of the Blue Cross and Blue Shield carriers.
Related: Anthem earnings, dissected
For the first nine months of 2016, the Blues studied had a combined medical loss ratio, or ratio of medical claims to revenue, of about 90 percent.
That was down from a combined medical loss ratio of 103 percent for the comparable period in 2015.
Twenty-one of the 32 Blues included in the analysis still had medical loss ratios high enough to suggest that they suffered underwriting losses, after taking administrative costs into account.
But “75 percent of the Blues included in our study had an improved MLR through the first nine months,” the analysts write.
Blue Cross and Blue Shield of North Carolina, for example, suffered through a terrible year in 2015. The Durham, North Carolina-based carrier reported a miserable 101 percent medical loss ratio for the first three months of 2015, and 103 percent medical loss ratio for all of 2015.
Related: N.C. Blue may take $400 million individual policy hit
For the first nine months of this year, the company’s medical loss ratio has fallen to 79 percent.
Analysts blame the 2015 losses partly on problems with major ACA insurer stabilization programs, such as the ACA risk corridors program, which was supposed to use cash from thriving exchange plan issuers to help struggling issuers. The analysts also blame insurers’ lack of knowledge about how the ACA system was really working when they were setting 2015 rates.
The S&P study has limitations: Analysts excluded the many Blue Cross and Blue Shield companies controlled by Indiana-based Anthem Inc. They also excluded Blue Shield of California, because the California financial reporting format is much different than the format for the other non-Anthem Blues.
Everyone has opinions about the Affordable Care Act. But the rating agencies’ views carry extra weight, because what the rating agencies think about a company or an industry affects how much companies pay for loans.
For a look at more about the Blues’ individual health line performance and what that might mean for agents, brokers and clients, read on.
One way the Blues held down claims was to seek steeper discounts from a smaller number of doctors and hospitals. (Image: Thinkstock)
1. Skinny provider directories
Health care providers hate tough health plan rate negotiations and narrow provider networks that shut them out, but S&P is giving the narrow network strategy some of the credit for improving the Blues’ results. S&P analysts aren’t saying anything about moves to expand provider networks.
Related: Slavitt says consumers want low health premiums
