Large health insurers adjust strategies as self-funded plans gain popularity
Reprints
As self-funded health insurance plans grow more popular with employers, the commercial portfolios of some of the nation's largest health insurers have become increasingly weighted toward fee-based administrative services contracts.
“Commercial growth has been really hard to get these days,” said Jennifer Lynch, a research analyst at New York-based BMO Capital Markets, citing pricing conditions in the fully insured commercial market, persistently slow employment and anemic new-business formation rates.
To offset attrition in their fully insured enrollments, some insurers are aggressively targeting administrative service-only contracts for self-insured employers. Minnetonka, Minn.-based UnitedHealth Group Inc. added 1.27 million members to its commercial ASO enrollments through conversions and new clients in 2012, while Cigna Corp. added more than 766,000 commercial ASO members.
“On the commercial side, you're likely to see the most growth in ASO products for self-funded employers,” said Vishnu Lekraj, a Chicago-based research analyst at Morningstar Inc. “It'll be a theme going forward, but it's not going to be something that happens overnight.”
In a February conference call with investors, Cigna President and CEO David Cordani noted that ASO products are projected to generate roughly 50% of the health insurer's new business in 2013. Mr. Cordani said the ASO products' growth has been driven largely by employers' demand for greater transparency and control of their group health costs.
“Employers see that transparency as an opportunity to align the incentives, to understand how their significant investment is performing, to be in a position to make changes throughout the course of the year and to be in position to communicate more effectively with their employees,” Mr. Cordani said.
Read Next
-
Health care reform provisions forecast an uncertain future for insurers
Health insurers performed reasonably well in 2012, but analysts say considerable uncertainty remains about the industry's readiness for the onset of key health care reform provisions in 2014.
