Researchers indicated that payer profitability may have increased in four health insurance markets in 2020. According to a brief from Kaiser Family Foundation, gross margins and medical loss ratios from 2020 may confirm that payer profitability increased during the coronavirus pandemic, although the results are still tentative without administrative cost data.
- Effects of the pandemic on four sectors: The researchers leveraged data from the National Association of Insurance Commissioners (NAIC) to observe the pandemic’s effects on the profitability of four health insurance markets: Medicare Advantage, Medicaid managed care, the individual health insurance marketplace, and the fully-insured group health insurance marketplace.
- The outcomes of the research: The brief of Kaiser Family Foundation examined insurer profitability from two angles: gross margins—or the amount of premium revenue that remains each month after the payer covers members’ claims—and medical loss ratios. Gross margins for the fully-insured group market in 2020 were 16 percent higher than they were in 2019 and 14 percent higher than in 2018 while the annual medical loss ratio dropped two percentage points from the 2019 and 2018 ratios.
- The change in the graph: The researchers pointed out that waiving cost-sharing for coronavirus treatment, waiving telehealth visit cost-sharing, and offering premium credit or other forms of flexibility on premium payments could have lowered margins and boosted medical loss ratios. Nevertheless, they concluded that the results indicated that payers may have come more profitable during the pandemic.
- Criticisms faced: Payers received a lot of backlashes when the public perceived that they were raking in more revenue during the pandemic. Major payers and payer organizations like America’s Health Insurance Plans (AHIP) retorted that they would be using the revenue when the downstream impacts of delayed elective care hit.
- A profitable year 2020: “By the end of 2020, gross margins per member per month across these four markets remained relatively high and medical loss ratios were relatively low or flat compared to recent years,” the researchers discerned. “These findings suggest that many insurers remained profitable through 2020.”