Commercial health insurers’ revenues fell 90% last year – InsuranceNewsNet


Commercial health insurers suffered a 90% decline in underwriting revenue last year as fewer people signed up for group health and instead switched to individual coverage on an exchange or Medicaid program, and COVID care requirements far exceeded expectations.

These are two key factors behind the poor performance of the commercial health insurance industry in a down year for health insurance as a whole, which saw a 65% decline in underwriting revenue, according to the report. from AM Best on health insurance performance in 2021.

The industry challenge was not overall premium growth, which rose 6.8% across all lines, but systemic changes in coverage, particularly the migration of commercial lines to Medicaid and individual lines, which resulted in a slight decline in premiums for commercial lines.

“The last time the commercial segment was subject to a similar degree of earnings volatility was in 2014, the first year of the Patient Protection and Affordable Care Act (ACA) and scholarships,” according to The report. “In 2021, COVID-related expenses – including treatment, testing and vaccinations – were the main driver of declining revenue. The cost of these claims far exceeded industry-wide projections.

Healthcare carriers faced surprisingly high COVID expenses that were mandated by the federal government. For example, more people were tested as the technology became more accessible in 2021. Insurers were required to cover costs but could not direct consumers to lower-cost providers, such as pharmacies, and people were free to use more expensive urgent care centers. According to the report, COVID tests and treatments were more expensive for working-age adults, which hit commercial insurers the hardest as they also saw consumers revert to routine and elective care.

The lines with the best premium growth were Managed Medicaid, up 14.2%, and Medicare Advantage, up 10.5%, year-over-year.

“Medicaid carriers have benefited from growth in enrollments, improved health status of new enrollees, and the inability of states to unenroll individuals from the program amid the public health emergency ( PHE),” according to the report.

Commercial health is generally the strongest line in the industry, offsetting public programs, such as Medicaid, and the individual market. But last year, it was the expansion of individual business through ACA exchanges that compensated sales reps, who didn’t see their premium increase despite a surge in hiring. ACA registrations rose to 12 million in 2021 from 11.4 million. The jump was even bigger this year, up to 14.5 million so far.

Small carriers concentrated in the commercial sector found themselves in a particularly difficult position.
— Antonietta Iachetta, AM Best Senior Financial Analyst

“Historically, the commercial segment has generated most of the health insurance industry’s revenue, but in recent years membership and government program revenue, typically at lower margins, have begun to grow, becoming an integral source of health insurers’ profits and operations,” according to the report. ‘industry.”

Although Medicare Advantage increased the premium, these carriers also saw more consumers using medical services. Although MA accounted for 26% of total underwriting revenue, its underwriting results were 46% lower than 2020. Claims were up 32% for hospital and medical services, but the report showed that MA n It wasn’t as hard hit by COVID-related spending because older people were more cautious about exposure.

Large diversified carriers fared better, according to Antonietta Iachetta, principal financial analyst at AM Best.

“Small carriers with concentrations in commercial operations found themselves in a particularly difficult position – more than half of insurers with capital and surplus below $50 million experienced underwriting losses in 2021, the largest share highest number of companies with losses for this group since 2012,” Iachetta said.

NAIC has a warning

The National Association of Insurance Commissioners also noted the industry’s baffling year in its annual review.

“The health insurance industry continued its tremendous growth trend, but saw a significant decline (41%) in net profit to $19 billion and a decline in profit margin to 2.1% in 2021 compared to a net profit of $31 billion and a profit margin of 3.8% in 2020,” according to the annual report. “The combined ratio increased from 96% to 98%.”

Net profit and profit margins.

The NAIC attributed the decline in underwriting results to a 14% increase in total hospital and medical expenses, which was offset by an 8% increase in premiums, a 7% decrease in claims expenses and administrative generals.

The increase in medical spending was due to pent-up demand for services deferred from 2020. Although more people received delayed treatment last year, the NAIC expressed concern about the long-term effects of these deferred care.

“It should be noted that in the future, it is also possible that delayed treatment could lead to a worsening of the medical condition, leading to a further increase in claim costs,” according to the report. “It is also possible that Medicare/Medicare Advantage and Medicaid underwriters, as well as comprehensive underwriters serving older, high-risk populations, may be negatively affected.”

Steven A. Morelli is editor for InsuranceNewsNet. He has over 25 years of experience as a journalist and editor of newspapers and magazines. He was also vice-president of communications for an association of insurance agents. Steve can be reached at [email protected]

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