Skip to content

Wary Of Exchanges, Insurers Are Wooed By Expanded Medicaid Program

Can’t see the audio player? Click here to download.

In California and much of the country, it’s a tale of two programs under the Affordable Care Act: state insurance exchanges and expanded Medicaid.

Many health insurers, citing financial losses or the uncertainty of federal funding, have left the government exchanges where consumers buy subsidized coverage. The nation’s largest health insurer, UnitedHealth, exited the Covered California marketplace at the end of last year, and for 2018 Anthem will stop selling exchange policies in about half of California’s counties.

Yet Medicaid, the joint federal and state program for the poor that was expanded under the health law, keeps attracting more insurers. One big reason: There’s money to be made. In an exclusive story last week, Kaiser Health News reported that insurers in California’s Medicaid program, known as Medi-Cal, made $5.4 billion in profits from 2014 to 2016, in part because the state paid generous rates during the initial years of expansion.

Anthem, which has about 1.3 million Medi-Cal enrollees, posted a net income of $549 million for that three-year period, or a profit margin of 8.1 percent. The state aims for a 2 percent profit margin when setting rates. Health Net, a unit of Centene, made $1.1 billion over three years, notching a profit margin of 7.2 percent.

Seeing opportunity in this public program, two more industry giants, UnitedHealth and Aetna, recently joined Medi-Cal.

California’s Medi-Cal director, Jennifer Kent, told Kaiser Health News she intends to recoup billions of dollars from insurers within the next year, once audits are complete and retroactive rate adjustments are made. The state also says it’s working on ways to better link health plan payments to their performance on delivering patient care.

Chad Terhune, a senior correspondent at California Healthline and Kaiser Health News, appeared last week on KQED and talked with health reporter April Dembosky about the role insurers play in serving California’s poorest patients.

Related Topics

Capitol Desk Health Industry Medi-Cal Multimedia