Health insurers appeared to remain profitable in 2020

Keith A. Reynolds

Financial data from the NAIC show that insurers in most markets appeared to become more profitable in 2020.

Despite the impact of the COVID-19 pandemic, insurance companies in most markets appeared to become more profitable in 2020.

According to an analysis from the Kaiser Family Foundation based on data which insurers provide to the National Association of Insurance Commissioners (NAIC), insurers across four markets saw an increase in gross margins which seems to indicate an increase in profitability. The four markets are: Medicare Advantage, Medicaid managed care, individual (non-group), and fully insured group (employer).

While gross margins do not directly translate to increased profitability, but without a commensurate increase in administrative costs it could indicate that these markets have become more profitable during the pandemic. Federal government required insurer to cover all coronavirus testing for their beneficiaries in 2020, which has been continued by the Biden administration, but despite this claim costs fell and margins increased compared to 2019, according to the analysis.

When looking at the medical loss ratio, or the percent of premium income insurers pay in medical claims, all four markets saw a decrease of between 2 and 4 percent between 2019 and 2020, the analysis says.

It is worth noting that another Kaiser Family Foundation analysis found that commercial insurers will owe substantial rebates, estimated at about $2.1 billion, to beneficiaries this year under the Affordable Care Act’s Medical Loss Ratio provision. Furthermore, risk sharing arrangements being applied to Medicaid in many state may reduce overall margins calculated in the analysis.

“The pandemic’s effect on health spending and insurer financial performance in 2021 remains uncertain,” the analysis says. “Health care utilization has mostly rebounded to pre-pandemic levels and there could be additional pent-up demand for care that had been missed or delayed last year. Additionally, while the cost of vaccine doses has largely been borne by the federal government, the cost of administering shots will often be covered by private insurers.”