While insurers have complained that participating in the Patient Protection and Affordable Care Act (PPACA) individual marketplace has largely been an unprofitable endeavor, we've heard far fewer complaints from them about the PPACA's dramatic expansion of Medicaid, which has turned out to be a major business opportunity for the biggest players in the insurance industry.
According to an analysis by Fitch Ratings, the expansion of Medicaid led to a 34 percent growth in Medicaid-related revenue for the insurance industry in 2014, the first full year of the PPACA.
The largest for-profit insurer in the country, UnitedHealth Group, is the leading Medicaid insurer as well. It took in 15 percent of the $115 billion in Medicaid premiums written in 2014.
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Leaders at UnitedHealth have said the company will likely stop participating in the PPACA marketplace if it does not become more profitable in the next year.
Four other large insurers – Anthem, Centene, Molina, and Wellcare – combine with UnitedHealth to account for nearly half of the Medicaid market.
Not only has the expansion of Medicaid made the low-income health care program an attractive venture for insurers, but efforts by the federal government to reduce spending on Medicare has perhaps incentivized some insurers to take a second look at Medicaid.
"The Medicaid business is modestly profitable and experiences low volatility and historically has been less profitable than Medicare, however with Medicaid expansion and reimbursement reductions under the Affordable Care Act, Medicare, and Medicaid are starting to achieve profit parity," said Doug Pawlowski, senior director at Fitch Ratings.
The market could grow further in coming years as states that initially refused the Medicaid expansion are reconsidering their decision. The cracks in the Republican opposition to the expansion, visible from the very beginning, are becoming even greater. Montana and Louisiana have embraced the expansion in recent months, and Republican governors in South Dakota, Utah, and Wyoming have pushed for it.
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