In 2023, publicly traded US health insurance companies continued to experience growth, with total GAAP revenue climbing 10.4% to reach $1.07 trillion, as highlighted in a new report by AM Best.
However, the same report also forecasted potential challenges to future profitability as earnings from government programs begin to normalize.
The report, titled “Revenue Grows but Margins Are Pressured for US Publicly Traded Health Insurers,” noted that half of the 10 insurers analyzed achieved double-digit premium growth last year.
Oscar Health, Inc. led with a 46.9% increase, while the group collectively saw a 28.5% rise in investment income. Overall, net income for these insurers grew to $45.3 billion, marking a 6.8% increase from 2022, which itself had seen a significant 12.5% increase from the previous year.
“With medical costs continuing to rise across the United States, insurers have been raising premium rates and are likely to continue doing so in 2024 to maintain favorable earnings,” said Kaitlin Piasecki, an industry research analyst at AM Best.
The report also detailed specific pressures on Medicare Advantage earnings, notably due to reduced reimbursement rates from the Centers for Medicare & Medicaid Services and rising medical claims and utilization.
Additionally, the Medicaid managed care sector is beginning to see significant drops in enrollment and potential worsening of the risk pool as eligibility redeterminations conclude.
Jason Hopper, associate director of industry research and analytics at AM Best, provided insights on the outlook for companies heavily involved in government programs.
“Overall earnings for companies solely operating government programs could be challenged in 2024, but these companies should remain profitable. Medical management of those with chronic conditions, as well as quality programs and related bonus payments, will be extremely important for sustained earnings for these health plans,” he said.
“For plans operating in all business segments, commercial business margins will become a greater focus given the likely earning declines in Medicare Advantage and Medicaid managed care,” Hopper said.
This evolving landscape suggests that while current growth trends are positive, US health insurers may face more nuanced challenges in maintaining profitability amid shifting market and regulatory dynamics.
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