‘Private Option' Benefits List of Largest Health Insurers

‘Private Option' Benefits List of Largest Health Insurers
Mark White: Growth at Arkansas Blue Cross & Blue Shield driven by “private option.” (Jason Burt)

The effect of the “private option” — Arkansas’ use of federal Medicaid expansion funding to buy private health insurance for the working poor — is written all over this year’s list of the state’s largest health insurance companies.

Arkansas Blue Cross & Blue Shield, always the state’s dominant carrier, reported to the Arkansas Insurance Department a 46 percent increase in health insurance premium collected in-state in 2014, the first year the private option was in effect. ABCBS reported $1.93 billion in Arkansas premium in 2014, a little more than the next nine health insurance carriers combined. With $1.99 billion in total revenue last year, ABCBS is also the third-largest private company headquartered in Arkansas.

President and CEO Mark White told Arkansas Business that last year’s growth was driven by 206,000 new members who obtained coverage because of health care reform, primarily the private option.

“When we started off thinking about the ACA and the fact that there were half a million Arkansans who were without insurance, we anticipated there would be quite a bit of enrollment,” White said in May.

Those newly insured also led ABCBS to create about 200 jobs, giving it a workforce of about 2,800.

ABCBS’ net income for 2014 was $46 million, a 21.9 percent increase in profit compared with the 42.6 percent increase in revenue, meaning its margin was slimmer. Its return on revenue in 2014 was 2.32 percent, down from 2.71 percent in 2013.

The other nine health insurance carriers on the list also reported increases in premium written in 2014, with this caveat:

WellCare Health Plans Inc. of Tampa, Florida, moved from No. 10 last year to No. 6 this year, thanks to its acquisition in January 2014 of Windsor Health Group Inc. of Atlanta. Windsor had been ranked sixth last year based on $138 million in premium written in 2013, while WellCare wrote $15.5 million. WellCare’s $116 million in 2014 Arkansas premium was, then, a decrease of 24 percent from the 2013 combined total of WellCare and Windsor.

Cigna Corp., which was inadvertently omitted from last year’s list, takes its place at No. 9 with $55.3 million in premium written in Arkansas last year, more than three times its 2013 level.

(Get the List of the Largest Insurance Companies in PDF or Spreadsheet (XLS) formats.)

The future of the private option in Arkansas is unsure. It has been extended through 2016 by a supermajority vote of the General Assembly, but an advisory board appointed by Gov. Asa Hutchinson is exploring alternatives.

The great unknown in health insurance is what premiums will look like next year, especially in the health care exchange plans that cover private option clients and tens of thousands of Arkansans who buy individual insurance.

Rate requests for 2016 have been submitted to the Arkansas Insurance Department, which was required by federal law to publish any requests for premium increases of 10 percent or more. Only two plans for sale in the state asked for double-digit rate increases — 10.5 percent for a Coventry Health & Life Insurance Co. plan that covers only 16 Arkansans and 21.2 percent for a United HealthCare plan that covers 521.

Elsewhere in the country, as reported recently by The New York Times, rate increases exceeding 50 percent have been requested. Because only the double-digit requests are currently known, the average increase in 2016 premiums won’t be known until the fall.

Mark Friedman contributed to this report.