Best’s Market Segment Report: Health Insurers Successfully Navigate Pandemic, Rapid Growth of Government Programs – Yahoo Finance
OLDWICK, N.J., March 08, 2022–(BUSINESS WIRE)–Despite pandemic-related challenges, the majority of the U.S. health insurance companies reported another year of favorable earnings in 2021, at $29.7 billion through the third quarter, with improved capital positions, according to a new AM Best report.
The annual Review & Preview Best’s Market Segment Report, titled, “Health Insurers Successfully Navigate Pandemic and Rapid Growth of Government Programs,” states that the favorable third-quarter earnings come on the heels of very strong years in 2019-2020, with net income of $34.3 billion and $41.1 billion, respectively. Industry premiums through the first three quarters of 2021 showed material year-over-year growth of 7.1%, to $798.6 billion, driven by enrollment increases in government programs.
The pandemic will continue to have an impact on health insurers in 2022, with a number of unknowns: how many more variants will occur, how long until COVID-19 becomes endemic and when the federal government will end the Public Health Emergency period. “Health insurers that are larger and more diversified have for the most part been able to manage any increases in claims,” said Sally Rosen, senior director, AM Best. “However, smaller, regional insurers are struggling with the cost of COVID-19 treatment and testing. These companies lack diversification and are typically geographically concentrated, with many located in areas with lower vaccination rates, and as a result, have seen a greater number of COVID claims, some with higher severity. They also may not have strong risk-adjusted capitalization levels, or access to a parent with the financial wherewithal to provide capital support. These companies may continue to face challenges until the pandemic ends or becomes endemic, or if there is a change to how testing claims are covered.”
Other highlights in the report include:
Commercial premiums fell to $264.0 billion through third-quarter 2021, as group products lost premium on lower-than-historical rate increases for 2021; selection of lower-priced products; benefits buy-downs; and continued group transition to administrative services only or self-funded structures.
Following a record income of $7.1 billion in 2020, underwriting results for Medicaid carriers in 2021 likely will be strong again given the declines in utilization and morbidity from pre-pandemic levels, as well as lower administrative costs due to lower membership turnover. However, earnings from this segment are expected to decline as states implement caps on profitability.
The profitability of Medicare Advantage plans grew significantly in 2020, with underwriting income of $14.1 billion. Despite utilization reverting to pre-pandemic levels, the segment is expected to be profitable in 2021-2022, but whether members will experience any material increase in morbidity due to deferred treatment, causing a worsening in the severity of illnesses, remains to be seen.
Dental and vision sales for group products resumed after a slowdown in 2020, although delays in preventive visits in some instances have resulted in higher claims severity. At the same time, sales of voluntary products have been mixed, as the ability to conduct face-to-face meetings with potential customers has been challenging during the pandemic.
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To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=318076.
For a video discussion about this report with Rosen and Doniella Pliss, director, AM Best, please visit http://www.ambest.com/v.asp?v=ambrphealth222.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Contacts
Doniella Pliss
Director
+1 908 439 2200, ext. 5024
doniella.pliss@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280
sally.rosen@ambest.com
Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com
