Publicly traded health insurance companies in the United States have shown commendable financial performance in the post-pandemic era, with a 9% increase in net income to $40 billion in 2022, despite healthcare utilisation surpassing pre-pandemic levels, according to a recent report by AM Best.
AM Best’s report highlights that improved pre-tax and net earnings were driven by the acquisition of government business and health care service ventures.
However, the operating environment in the healthcare industry continues to evolve, presenting new challenges for insurers.
One of the primary pressures felt by health care providers is the shortage of staff and increased costs, which are being passed on to insurers whenever possible.
As a result of shifting utilisation patterns, insurers are witnessing a rise in both the frequency and cost of outpatient care.
AM Best anticipates that the unevenness in utilisation patterns will eventually level off. However, there remains an underlying concern about a potential increase in morbidity driven by missed preventive screenings or other care delays resulting from the COVID-19 pandemic.
The report emphasises that the companies analysed in the study have a robust presence in government program markets, which contributed to strong premium growth and bolstered revenues.
Medicaid carriers particularly benefited from postponed eligibility redistributions during the pandemic. As the redeterminations resume in the second quarter of 2023, Medicaid premiums are expected to decrease while boosting individual commercial business, as some individuals transition from Medicaid to individual ACA products.
In recent years, the health insurance industry has witnessed significant increases in fee income, driven by acquisitions and growth in other non-regulated health businesses.
Fee income experienced a year-over-year growth of 11% in 2022, reaching $244 billion. Notably, in 2019, fee income surged by 155% following The Cigna Group’s acquisition of pharmacy benefit manager Express Scripts.
AM Best projects that merger and acquisition activities within the sector will continue to focus on non-insurance operations and vertical integration.
Shareholders’ equity for publicly traded health companies experienced a 6% decline to $240 billion in 2022, primarily attributed to unrealised losses on investments.
“Benefiting from a shorter liability profile, health insurers should see a more favourable impact in the near to medium term, as the proceeds from these bonds can be reinvested at the current higher rates, leading to a bump in overall portfolio investment income,” said Helen Andersen, industry analyst, AM Best.
