We analyzed insurer-reported financial data from Health Coverage Portal TM, a market database maintained by Mark Farrah Associates, which includes information from the National Association of Insurance Commissioners (NAIC). We used the “Exhibit of Premiums, Enrollment, and Utilization” report for this analysis. The dataset analyzed in this report does not include NAIC plans licensed as life insurance or California HMOs regulated by California’s Department of Managed Health Care. Additionally, for Medicaid, there are four states (Arizona, California, New York, and Oregon) that have different reporting practices and therefore consistently only have partial NAIC data available.

We excluded plans that filed negative enrollment, negative or zero dollars in premiums or claims, did not report for all variables that were being analyzed, or reported more than 1,000 hospital inpatient days per 1,000 enrollees. We only included plans that were categorized as having a “medical” focus in our analysis and exclude “specialty” plans which are categorized as “ancillary or supplemental benefit plans.” We also excluded any plans from the U.S. territories. We corrected for plans that did not file “member months” in the annual statement but did file current year membership by imputing these values. If, after imputing, plans still did not have “member months,” they were excluded.

The group market in this analysis only includes fully insured plans. Premiums to Medicare Advantage plans do not include payments for Medicare Part D benefits. NAIC defines “Medicaid” as “business where the reporting entity charges a premium and agrees to cover the full medical costs of Medicaid subscribers.” This explicitly excludes Administrative Services Only (ASO) plans. We only use “medical” focused plans to help exclude any specialty plans; however, prepaid ambulatory health plans (PAHPs), prepaid inpatient health plans (PIHPs), or Programs of All-Inclusive Care for the Elderly (PACE) plans may be included in the analysis due to NAIC’s definition of Medicaid. We compared the NAIC plans from the second quarter of 2018 to the plans in the Centers for Medicare and Medicaid Services’ Medicaid Managed Care Enrollment Report and removed three plans from our analysis that did not offer comprehensive Medicaid acute services. However, CMS enrollment data is not available for 2019 or 2020, so we were not able to make the same comparison for these years.

Gross margins were calculated by subtracting the sum of total incurred claims from the sum of unadjusted health premiums earned and dividing by the total number of member months. Member months are equivalent to the cumulative number of members that a firm has in a given period multiplied by the number of months in that period. For example, for annual data, member months are calculated as the number of members a firm had during that year multiplied by 12 months. Therefore, calculations represent trends in each market, not for individual plans. Premiums for Medicare Advantage plans primarily consist of federal payments made to plans for Medicare-covered benefits and include any additional amounts plans may choose to charge their enrollees. Premiums for the individual market were not adjusted to account for rebates required to be remitted to enrollees. Premiums for Medicaid do not reflect contractual adjustments related to risk corridors or other risk-sharing adjustments.

To calculate medical loss ratios, we divided the market-wide sum of total incurred claims by the sum of all unadjusted health premiums earned. Medical loss ratios in this analysis are simple loss ratios and do not adjust for quality improvement expenses, taxes, or risk program payments. For example, the 2016 CMS managed care final rule (CMS-2390-F) allows managed care plans to adjust their medical loss ratio calculations to account for quality improvement expenditures and the removal of estimated Medicaid taxes, licensing, and regulatory fee from the revenues when filing submitting data to CMS. It should be noted that other organizations and agencies use claims and premiums reported in the “Statement of Revenues & Expenses” for their medical loss ratio calculations.

Issue Brief Appendix

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