Largest Health Insurance Companies By Market Share

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When the coronavirus pandemic took shape in the United States in the early months of 2020, there was some uncertainty about its impact on the financial performance of health insurance companies. Hospitals, doctors and other healthcare providers canceled elective procedures to free up beds, staff and supplies early in the pandemic and limit unnecessary exposure and risk of infection. Patients also chose to forgo non-urgent treatment to limit risks and exposure to the virus. This dynamic led to an unprecedented drop in health care spending and use during the spring of 2020. Although spending rebounded in the second half of the year, health care spending in 2020 was slightly lower than in 2019, meaning that it was the first time in history that health care spending in the United States has decreased since last year. At the same time, the economic crisis and resulting job losses prompted changes in health care coverage in several markets, including a relatively small decline in employer coverage through September, but a significant increase in Medicaid coverage and Medicaid. extensive During this time, the number of Medicare Advantage plans offered by private insurance companies continued to rise.

Largest Health Insurance Companies By Market Share

Largest Health Insurance Companies By Market Share

In this review, we analyze recent economic data to examine how the insurance market fared in 2020 as the pandemic emerged and developed throughout the year. We use financial data reported by insurers to the National Association of Insurance Commissioners (NAIC) and compiled by Mark Farrah Associates to examine medical claims and gross profit ratios in the Medicare Advantage, managed by Medicaid, individual (non-group) group. , and a fully insured group. health insurance markets (employer) through the end of each year. A more detailed description of each market can be found in the appendix.

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We find that by the end of 2020, the gross profit per member per month in these four market areas has remained relatively high and the medical claims ratios are relatively low or flat compared to recent years. These findings suggest that many insurance companies have remained profitable through 2020. Commercial insurers have significant discounts for consumers this year under the Medical Loss Ratio provision of the Affordable Care Act (ACA), according to a recent analysis. In Medicaid, the application of multiple state risk-sharing arrangements may ultimately reduce overall profits calculated based on NAIC annual data.

One way of assessing an insurer’s financial performance is to look at the gross margin per member per month, or the amount by which premium income exceeds claim expenses per registered member per month. Gross profit is a measure of financial performance, but a positive profit does not necessarily indicate profitability, as they do not take into account administrative costs or tax liabilities. However, a sharp year-on-year increase in profits without a commensurate increase in administrative costs could be a sign that this health insurance market has become more profitable during the pandemic.

Insurers were required to cover all costs of coronavirus testing for enrollees in 2020. (The Biden administration has issued guidelines that insurers must continue to pay for COVID-19 testing at no cost to enrollees). In addition, many insurance companies voluntarily waived the out-of-pocket costs of coronavirus treatment and some telehealth services by the end of 2020. In addition, Medicare Advantage plans may have increased copays for COVID hospitals by 20% as a result of the increase implemented by traditional Medicare . although these additional costs were offset by a temporary waiver during a public health emergency to a 2 percent forfeiture that would otherwise have reduced Medicare payments to Medicare Advantage plans. In general, insurance company compensation costs have decreased and profits have increased compared to 2019 (Figure 1).

Through the end of 2020, gross margins for individual market insurance and fully insured group market plans were respectively 4% and 16% higher than in 2019. However, gross margins for group market plans remained fully insured relatively flat in 2020. Compared to 2018 and gross profit for individual market plans decreased by 14% in 2020 compared to 2018. Individual market insurance companies overcorrected insurance premiums when calculating payments cost-sharing subsidy. Medicare Advantage plans’ annual gross profit was 24% higher in 2020 compared to 2019 and 31% higher compared to 2018. (Medicare Advantage plans’ gross profit per member per month tends to be higher than other health insurance markets, mainly because Medicare covers an older, sicker population and a higher average cost).

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Annual gross profit per member per month in the Medicaid market was 45% higher in 2020 than in 2019 and 34% higher than in 2018. Compared to other markets, the margins of the Medicaid MCO market are lower because, although prices must be actuarially sound, Medicaid payment rates are generally lower than in other markets. States can also use a variety of mechanisms to adjust plan risk, incentivize performance, and ensure that contributions are not too high or too low, including various options to change their capitalization rate or use risk-sharing mechanisms. CMS has issued guidance on options for changing MCO payments during the pandemic because states and plans have not been able to reasonably anticipate changes in utilization and spending. Many corrections made by states may occur retroactively and may not appear in the annual data.

Another way of assessing an insurer’s financial performance is to look at claim ratios, or the percentage of premium income that insurers pay out in the form of medical claims. In general, lower medical claims ratios mean that insurers have more income left over after paying medical costs to use for administrative costs or as profits. Each health insurance market has different administrative needs and costs, so a lower health claim ratio in one market does not necessarily mean that a market is more profitable than another. However, in some markets, if administrative costs remain largely unchanged from year to year, a reduction in claims ratios would mean that plans become more profitable.

Medical loss ratios are used in many different ways in state and federal insurance regulations. In the commercial insurance market (individual and group insurance markets) Insurers must give discounts to individuals and businesses if their claim ratios do not meet the minimum requirements set by the ACA. Medicare Advantage insurance companies must report claims ratios at the contract level. They are also required to provide refunds to the federal government if their MLRs fall below the required level, and are subject to additional penalties if they fail to meet loss ratio requirements for several consecutive years. For Medicaid MCOs, CMS requires states to develop a Medicaid capital ownership rate to achieve an MLR of at least 85%. There is no federal requirement that Medicaid plan to pay payments if they do not meet the MLR threshold, but most specify that a contract with MCOs requires payments in at least some cases.

Largest Health Insurance Companies By Market Share

The medical loss ratios presented in this publication differ from the definition of MLR in the ACA and CMS Medicaid managed care final rule, which makes some changes to improve quality and for tax reasons, and does not n consider reinsurance, risk corridors or risk. adjustment charges. . In particular, the health insurance tax, which was permanently repealed starting in 2021, was in effect in 2018 and 2020, but not in 2019. The chart below shows simple health claims ratios, i.e. the share of premium income that insurers pay in claims, without changes (Figure 2). Annual loss ratios in the Medicare Advantage market decreased by two percentage points in 2020 compared to 2019 and 2018 and are now below the 85 percent minimum required by law, although they can be higher than r required level after taking into account deductions from gross income. Annual loss ratios in the Medicaid managed care market in 2020 were down four percentage points from 2019 (and three percentage points from 2018), but still met the 85 percent minimum, even without counting about possible changes.

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Loss ratios for the fully insured group market decreased by two percentage points between 2019 and 2020 and are similar to 2018 values. Loss ratios for individual markets also decreased by two percentage points in 2020 compared to the previous year, but increased by four percentage points from compared to 2018. Claim ratios in individual markets were already quite low before the pandemic, and the market’s insurance companies expect to announce more. more than $2 billion in reimbursements to consumers this discount based on their experiences in 2018, 2019 and 2020. Insurers in individual markets have been profitable for several consecutive years as the market stabilizes. Average premiums have fallen for three consecutive years, while insurer participation in the ACA exchanges has increased in many parts of the country.

Based on annual financial data that insurers report to the NAIC, health insurers appear to have improved in most markets during the pandemic, although we cannot directly measure profits without administrative cost data.

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