Report confirms gradual growth in hospital-owned health plans

More hospitals and health systems have started or expanded their own health insurance plans since the Affordable Care Act was enacted.

Hospitals view owning a health plan as a way to build their population health programs by combining medical claims and clinical data. A health plan also allows hospitals to control more of the premium dollar.

Approximately 15.3 million people received their health coverage through a provider-owned health plan in 2014 compared with 12.4 million in 2010, an average 6% annual increase in enrollment over that time span, according to a report from consulting firm McKinsey & Co. Most of that growth came in Medicaid plans. Many safety net systems have their own Medicaid plans since low-income people are their primary patients.

Medicaid represents the largest business line for provider health plans. Roughly 57% of their members were on Medicaid in 2014, compared with 32% in employer commercial plans, according to McKinsey. In 2010, half of those in provider-owned plans were in Medicaid, and 43% were in commercial plans.

Despite the gradual growth in the number of hospitals and providers launching their own plans and their expanding membership, not all plans have been successful. Catholic Health Initiatives told bondholders last month it was putting the brakes on its new insurance arm, Prominence Health, because of heavy operating losses. About 45% of the plans McKinsey analyzed had a negative margin in at least one of the past three years.