The Big Five Health Insurers’ Membership and Revenue Trends: Implications for Public Policy

By The Commonwealth Fund

Toplines

• The 5 largest commercial insurers increasingly rely on their Medicaid and Medicare business for growth and profits
• In 2016, Medicare and Medicaid accounted for 59 percent of combined U.S. revenue for the five largest US insurers

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Synopsis

The five largest U.S. commercial health insurers collectively cover more than two-fifths of the insured population. Over the past decade, these companies’ bottom lines have become increasingly linked to Medicare and Medicaid, with the two programs accounting for 59 percent of revenues in 2016. Access to coverage could be improved if insurers that participate in Medicaid or Medicare were required to also participate in the marketplaces in the same geographic area.

The Issue

The U.S. health insurance industry has consolidated. As of 2016, the five largest for-profit insurers — UnitedHealthcare, Anthem, Aetna, Cigna, and Humana — had 125 million members, representing 43 percent of the country’s total insured population. With enrollment in Medicare and Medicaid expanding, the “big five” have become increasingly dependent on the two programs for their growth and profitability. At the same time, they have entered and exited the Affordable Care Act (ACA) marketplaces in multiple states, adding to the fragmentation of insurance markets and creating anxiety for consumers in regions left with few participating health plans. The New York Academy of Medicine’s Cathy Schoen and the Commonwealth Fund’s Sara Collins examined membership and financial trends for the five leading health insurance carriers.

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Key Findings

• In 2016, Medicare and Medicaid accounted for 59 percent of combined U.S. revenue for the five insurers, more than doubling since 2010, from $92.5 billion to $213.1 billion.
• Collectively, the five insurers’ membership grew by 23 million (23%) from 2010 to 2016, with four of the five growing by at least 20 percent. This was more than double the increase from 2005 to 2010, the five years leading up to the ACA’s passage.
• Medicare and Medicaid business grew faster than other segments between 2010 and 2016, doubling from 12.8 million members to 25.5 million across all five firms. By 2016, the carriers accounted for 52 percent of the Medicare Advantage market. Medicaid enrollment also doubled (7 million to 15 million).
• Despite experiencing losses in the individual market, four of the five (with the exception of Humana) reported that pretax profits either held steady or increased from 2013 through 2016, the first three years of the ACA’s individual-market reforms.
• Profit margins had declined between 2010 and 2013 (prior to ACA implementation) before stabilizing between 2014 and 2016 (with the exception of Humana), as individual-market losses were offset by gains in other segments.
• The stock prices for all five insurers cumulatively increased more than 200 percent from 2011 to 2016.