Insurance Companies Turn Increasingly to Medicaid and Medicare to Shore Up Revenue

Since 2009, private insurance companies have seen a decrease in commercial revenue and an increase in revenue generated from tax-funded public health care plans, according to a recent report on Healthcare Daily.  

Major insurers such as UnitedHealthcare (United) and Aetna exemplify this trend. From 2009 to 2014, United increased its revenue from Medicaid and Medicare 10%, while Aetna increased its revenue 24%.

This shift is explained by the expansion of Medicaid under the Affordable Care Act (ACA) and its emphasis on Managed Care Organizations. HMOs that already centered on providing Medicaid services have done well, while private insurance companies dependent on commercial profits have had to adapt. This is especially true because the restrictions that the ACA placed on private insurers, such as the inability to base eligibility on age or previous illness, has made the commercial market a less dependable source of revenue. This trend is likely to continue as hospitals consolidate and the federal government encourages more states to expand Medicaid coverage.—Katie Grosso

Reference: Goodman M. Report: in age of reform, insurance companies bet on public plans instead of commercial. Healthcare Daily. February 8, 2016.