Trend analysis of key solvency ratios for health plans in Medicaid managed care.

Abstract

The focus of this article is to assess the solvency of health plans that manage Medicaid members across key plan traits, specifically Medicaid dominant or plans with more than 75 percent Medicaid members, and plans owned by publicly traded companies, and sponsored by health care providers. The study accessed National Association of Insurance Commissioners (NAIC) financial data and computed key solvency ratios for 117 Medicaid health plans over a five-year time trend from 2007 to 2011. A mean test compared the mean values for each year and for the entire study period on risk-based capital (RBC), cash-flow margin and debt to total capital ratios across these plan traits. For all years except 2008 Medicaid dominant plans had a lower RBC ratio for all four out of five years. Cash-flow margin ratio for Medicaid dominant plans was only lower in 2011 than non-Medicaid dominant plans. From 2007 to 2010, debt to total capital was higher for plans owned by publicly traded companies than non-publicly traded companies. Given the potential for an expanding Medicaid market, Medicaid health plans have reduced their risk of insolvency by increasing the RBC over time and reducing their debt capital. However between 2010 and 2011 cash-flow margin ratio decreased by almost 180 basis points for Medicaid dominant plans.