Best’s Special Report: Publicly Traded Health Insurers Report Solid Post-Pandemic Results

Publicly traded U.S. health insurance companies posted a 9% increase in net income to $40 billion in 2022, even as utilization has reverted to, and in some regions, exceeded pre-pandemic levels, according to a new AM Best report.

The Best’s Special Report, “Publicly Traded Health Insurers Report Solid Post-Pandemic Results,” states that government business and health care service business acquisitions drove improved pre-tax and net earnings, but that the operating environment continues to evolve. Health care providers are feeling the pressure of staffing shortages and higher costs, which are being passed on to insurers when possible. With utilization patterns shifting, insurers are seeing more frequent and costlier outpatient care as well. AM Best expects some of the unevenness in utilization to level off, but there is still an underlying concern about a rise in morbidity, driven by missed preventive screenings or other delays in care due to the COVID-19 pandemic.

The report notes that the companies followed for the report have a strong presence in government program markets, which drove strong premium growth and bolstered revenues. “Medicaid carriers benefited from the postponed eligibility redistributions during the pandemic,” said Sally Rosen, senior director, AM Best. “Redeterminations that are resuming in the second quarter of 2023 likely will lower Medicaid premiums while boosting individual commercial business, as some who were formerly enrolled in Medicaid switch to an individual ACA product.”

The health insurance industry has recorded notable increases in fee income in recent years, according to the report, driven by acquisitions and growth in other non-regulated health business. Fee income grew by 11% year over year in 2022 to $244 billion but jumped by 155% in 2019 following The Cigna Group’s acquisition of pharmacy benefit manager Express Scripts. AM Best expects merger and acquisition activity in the segment to continue to focus on non-insurance operations and vertical integration.

Shareholders’ equity for publicly traded health companies declined by 6% to $240 billion in 2022, mainly due to the change in unrealized losses on investments. “Benefiting from a shorter liability profile, health insurers should see a more favorable 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.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=332972.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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