We present the fifth edition of our Health Insurer Financial Insights newsletter as we continue to operate in unprecedented times. This newsletter focuses on market profitability and capitalization trends for public and non-public health insurers and their claims experience through Q4 2020. Section 3 provides highlights from public companies’ Q1 2021 financial statements. Section 4 provides insight into how public health carriers are reporting the impact of COVID-19. Our aim is to keep you abreast of key market trends and dynamics that impact health insurer financial results and profitability. We hope you enjoy the newsletter and find it informative. Please look for our next edition in late summer 2021. 2020 Statutory Financials – Individual, Group, Medicare, and Medicaid Markets Overall, health insurers reported improved profit margins in 2020. Incurred claims in Q4 2020 were slightly lower than Q3 2020, but were close to normal claims levels following the dip in Q2 2020 caused by COVID-19 reduced utilization. 2020 loss ratios were lower year-over-year, likely due to the overall impact of COVID-19 on claims experience. 2020 Market Capitalization: Statutory Capital/Rate Based Capital (RBC) Trends Market capitalization measured by Total Adjusted Capital (TAC) continued to increase in 2020 at similar rate as in the prior years with public and other health insurers growing at a slightly higher rate in 2020 due to improved underwriting gains. Risk Based Capital ratios increased in 2020 with TAC increases growing more than Authorized Control Level (ACL) RBC. Q1 2021 Public Companies Financial Performance Public Companies reported margins in Q4 2020 lower than historical fourth quarter levels due to increased utilization. Generally, profitability improved to be in line with typical levels in Q1 2021 as loss ratios and operating expenses declined relative to Q4 2020. HEALTH INSURER FINANCIAL INSIGHTS Consulting Actuaries VOLUME 5 | JUNE 2021 IN THIS ISSUE 02 01 03 04 Market Capitalization: Statutory Capital/ RBC Trends Public Companies’ Financial Performance COVID-19 Corner 2020 Statutory Results by Market
Transcript
We present the fifth edition of our Health Insurer Financial Insights newsletter as we continue to operate in unprecedented times. This newsletter focuses on market profitability and capitalization trends for public and non-public health insurers and their claims experience through Q4 2020. Section 3 provides highlights from public companies’ Q1 2021 financial statements. Section 4 provides insight into how public health carriers are reporting the impact of COVID-19. Our aim is to keep you abreast of key market trends and dynamics that impact health insurer financial results and profitability. We hope you enjoy the newsletter and find it informative. Please look for our next edition in late summer 2021.
2020 Statutory Financials – Individual, Group, Medicare, and Medicaid Markets Overall, health insurers reported improved profit margins in 2020. Incurred claims in Q4 2020 were slightly lower than Q3 2020, but were close to normal claims levels following the dip in Q2 2020 caused by COVID-19 reduced utilization. 2020 loss ratios were lower year-over-year, likely due to the overall impact of COVID-19 on claims experience.
2020 Market Capitalization: Statutory Capital/Rate Based Capital (RBC) TrendsMarket capitalization measured by Total Adjusted Capital (TAC) continued to increase in 2020 at similar rate as in the prior years with public and other health insurers growing at a slightly higher rate in 2020 due to improved underwriting gains. Risk Based Capital ratios increased in 2020 with TAC increases growing more than Authorized Control Level (ACL) RBC.
Q1 2021 Public Companies Financial PerformancePublic Companies reported margins in Q4 2020 lower than historical fourth quarter levels due to increased utilization. Generally, profitability improved to be in line with typical levels in Q1 2021 as loss ratios and operating expenses declined relative to Q4 2020.
ALL MARKETS (COMMERCIAL, MEDICARE, MEDICAID, AND OTHER)
1. NAIC Health blanks only. Excludes NAIC Life/Accident/Health, NAIC P&C, and CA DMHC Filers. Data as of May 2021.
Profit MarginMargins for Public Companies increased by 1.2% over 2019. For Non-Public Blues, margins increased by 1.6% following lower profitability in 2019, and Other Health Carriers margins improved by 2.4% over 2019.
We summarize the profitability trends of carriers with 2020 reported statutory financial information. We also summarize enrollment and loss ratio trends in the Individual, Group, Medicare, and Medicaid markets. Overall, pre-tax margins increased in 2020 to 4.0% due to decreased loss ratios reflecting the impact from COVID-19 lockdowns in Q2 2020.
chart size 3.05 x 1.65
chart size 3.05 x 2.3
chart size 3.05 x 2.1
pg2 Total
Pre
-ta
x P
rofi
t M
arg
in (
as
% o
f P
rem
ium
)
2015 2016 2017 2018 2019 2020
4.8%
3.5%
4.0%
3.0%
-2%
-1%
0
1%
2%
3%
4%
5%
6%
7%
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blues
ALL MARKETS PRE-TAX PROFIT MARGINS2015 TO 2020/PUBLIC VS. BLUE VS. OTHER
2020 STATUTORY1 RESULTS BY MARKET01
Carrier Type 2015 2016 2017 2018 2019 2020vs 2019 2020
Public Companies 3.7% 3.7% 3.8% 3.8% 3.6% 1.2% 4.8%
Non-Public Blues -1.1% 0.5% 3.3% 3.9% 1.9% 1.6% 3.5%
Other Health Carriers -0.8% -1.1% 0.4% 0.6% 0.6% 2.4% 3.0%
All Health Carriers 1.1% 1.6% 2.8% 3.0% 2.4% 1.6% 4.0%
COMMERCIAL GROUP PREMIUMS PMPMPUBLIC VS. BLUE VS. OTHER
COMMERCIAL GROUP ENROLLMENTPUBLIC VS. BLUE VS. OTHER
Group premiums PMPM increased slightly in 2020, with average market premiums reaching $469 PMPM in 2020, an increase of 2.5% from 2019. The increase is the lowest for Other Health Carriers (1.6%) and highest for Non-Public Blues (2.9%).
GROUP MARKET
COMMERCIAL GROUP LOSS RATIOPUBLIC VS. BLUE VS. OTHER
6
8
10
12
14
16
18
2015 2016 2017 2018 2019
2015 2016 2017 2018 2019 2020
2020
2020
Co
ve
red
Liv
es
(in
Millio
ns)
L
oss
Ra
tio
pg 3 Group Market
74%
77%
80%
83%
86%
89%
92%
Pre
miu
m P
MP
M
chart size 3.05 x 1.65
2015 2016 2017 2018 2019
$360
$380
$400
$420
$440
$460
$480
$500
All Carriers Change: 5.6% 3.7% 4.5% 2.9% 2.5%
6
8
10
12
14
16
18
2015 2016 2017 2018 2019
2015 2016 2017 2018 2019 2020
2020
2020
Co
ve
red
Liv
es
(in
Millio
ns)
L
oss
Ra
tio
pg 3 Group Market
74%
77%
80%
83%
86%
89%
92%
Pre
miu
m P
MP
M
chart size 3.05 x 1.65
2015 2016 2017 2018 2019
$360
$380
$400
$420
$440
$460
$480
$500
All Carriers Change: 5.6% 3.7% 4.5% 2.9% 2.5%
6
8
10
12
14
16
18
2015 2016 2017 2018 2019
2015 2016 2017 2018 2019 2020
2020
2020
Co
ve
red
Liv
es
(in
Millio
ns)
L
oss
Ra
tio
pg 3 Group Market
74%
77%
80%
83%
86%
89%
92%
Pre
miu
m P
MP
M
chart size 3.05 x 1.65
2015 2016 2017 2018 2019
$360
$380
$400
$420
$440
$460
$480
$500
All Carriers Change: 5.6% 3.7% 4.5% 2.9% 2.5%
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blues
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blues
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blues
Loss RatioReported loss ratios decreased to 84.0%, a 1.4% decrease from 2019. The decrease is the smallest for Other Health Carriers (-0.7%) and largest for Public Companies and Non-Public Blues (-1.6%).
Enrollment2
Enrollment in the comprehensive fully insured Group market continued to decline in 2020, decreasing by 3.5% compared to 2019 enrollment.
Carrier Type 2015 2016 2017 2018 2019 2020 vs 2019 2020
Public Companies 80.0% 80.9% 81.7% 82.1% 84.0% -1.6% 82.4%
Non-Public Blues 83.7% 82.9% 81.7% 81.9% 84.3% -1.6% 82.7%
Other Health Carriers 88.0% 88.4% 87.8% 87.2% 88.8% -0.7% 88.1%
All Health Carriers 83.8% 83.8% 83.4% 83.4% 85.4% -1.4% 84.0%
1. NAIC Health blanks only. Excludes NAIC Life/Accident/Health, NAIC P&C, and CA DMHC Filers. Data as of May 2021.2. Some of the market enrollment is not included, most notably those insured by Life/Accident/Health statutory filers, which needs to be considered when reviewing this chart and
others in this report.
2020 STATUTORY1 RESULTS BY MARKET01
2015 2016 2017 2018 2019 2020
Total Enrollment (in Millions) 34.5 32.5 31.8 30.9 30.2 29.2
Total Enrollment (in Millions) 15.1 15.1 13.8 12.6 12.1 12.4
COMPREHENSIVE INDIVIDUAL ENROLLMENTPUBLIC VS. BLUE VS. OTHER
COMPREHENSIVE INDIVIDUAL PREMIUMS PMPMPUBLIC VS. BLUE VS. OTHER
COMPREHENSIVE INDIVIDUAL LOSS RATIOPUBLIC VS. BLUE VS. OTHER
2015 2016 2017 2018 2019 2020
2015 2016 2017 2018 2019 2020
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blueschart size 3.05 x
1.65
Pg 4 Individual Market
Co
ve
red
Liv
es
(in
Millio
ns)
Lo
ss R
ati
o
12.7% 23.3% 20.2% -1.0% 7.5%All Carriers Change:
Pre
miu
m P
MP
M
$150
$250
$350
$450
$550
$650
2015 2016 2017 2018 2019 2020
0
1
2
3
4
5
6
7
8
50%
60%
70%
80%
90%
100%
110%
2015 2016 2017 2018 2019 2020
2015 2016 2017 2018 2019 2020
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blueschart size 3.05 x
1.65
Pg 4 Individual Market
Co
ve
red
Liv
es
(in
Millio
ns)
Lo
ss R
ati
o
12.7% 23.3% 20.2% -1.0% 7.5%All Carriers Change:
Pre
miu
m P
MP
M
$150
$250
$350
$450
$550
$650
2015 2016 2017 2018 2019 2020
0
1
2
3
4
5
6
7
8
50%
60%
70%
80%
90%
100%
110%
2015 2016 2017 2018 2019 2020
2015 2016 2017 2018 2019 2020
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blueschart size 3.05 x
1.65
Pg 4 Individual Market
Co
ve
red
Liv
es
(in
Millio
ns)
Lo
ss R
ati
o
12.7% 23.3% 20.2% -1.0% 7.5%All Carriers Change:
Pre
miu
m P
MP
M
$150
$250
$350
$450
$550
$650
2015 2016 2017 2018 2019 2020
0
1
2
3
4
5
6
7
8
50%
60%
70%
80%
90%
100%
110%
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blues
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blues
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blues
Premiums PMPM2 Individual premiums PMPM increased in 2020 with reported average Individual market premiums of $550 PMPM, an increase of 7.5% from 2019. Non-Public Blues experienced the largest change in premiums at 12.9% while Other Health Carriers experienced a slight 0.9% reduction in premium PMPMs.
Loss Ratio2
Reported loss ratios decreased to 71.7%, a 4.5% decrease from 2019. The decrease is largest among Non-Public Blues at -5.5% and the lower for Public Companies and Other Health Carriers at -4.7% and -2.0%, respectively.
Enrollment3
Overall enrollment increased in 2020 for Public (3.7%) and Other Health Companies (5.0%). Non-Public Blues Companies enrollment continues to decrease. Public Companies’ market participation is likely driven by a more stable market and improved financial performance.
1. NAIC Health blanks only. Excludes NAIC Life/Accident/Health, NAIC P&C, and CA DMHC Filers. Data as of May 2021.2. The Public Companies Premium and Loss Ratio metric was adjusted for underreported premium.3. Some of the market enrollment is not included, most notably those insured by Life/Accident/Health statutory filers, which needs to be considered when reviewing this chart and
others in this report.
INDIVIDUAL MARKET
STATUTORY1 RESULTS BY MARKET01
Carrier Type 2015 2016 2017 2018 2019 2020 vs 2019 2020
Public Companies 91.8% 90.3% 71.3% 60.4% 63.1% -4.7% 58.4%
Non-Public Blues 105.5% 92.3% 79.9% 70.5% 78.7% -5.5% 73.2%
Other Health Carriers 104.8% 106.4% 92.5% 80.5% 84.0% -2.0% 82.0%
All Health Carriers 101.3% 94.5% 80.2% 71.1% 76.2% -4.5% 71.7%
Enrollment growth in the Medicare Advantage (MA) market continued in 2020 with the overall trend of gradual increases driven by population demographics and the continued popularity of MA plans. Essentially all of the growth has gone to Public Companies.
MEDICARE ENROLLMENTPUBLIC VS. BLUE VS. OTHER
2015 2016 2017 2018 2019 2020
2015 2016 2017 2018 2019 2020
chart size 3.05 x 1.0
chart size 3.05 x 1.5
Pg 5 Medicare
Co
ve
red
Liv
es
(in
Millio
ns)
Lo
ss R
ati
o
80%
85%
90%
95%
100%
0
2
4
6
8
10
12
14
2015 2016 2017 2018 2019 2020
2015 2016 2017 2018 2019 2020
Pg 6 Medicaid
Co
ve
red
Liv
es
(in
Millio
ns)
0
5
10
15
20
25
30
80%
85%
90%
95%
100%
Lo
ss R
ati
o
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blues
Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blues
Loss RatioReported loss ratios decreased to 83.1%, a 2.9% decrease from 2019. The decrease was largest for Non-Public Blues at 3.4%. Public Companies
Other Health Carriers
All Health Carriers
Non-Public Blues
Loss RatioReported loss ratios decreased to 86.6%, a 4.2% decrease from 2019. The decreases were highest among Public Companies and Non-Public Blues at 4.9% and 4.6%, respectively, and lowest among Other Health Carriers at 2.5%.
MEDICAID LOSS RATIO PUBLIC VS. BLUE VS. OTHER
Enrollment2
Enrollment increased by 2.6 million in insured Managed Medicaid programs for 2020. Public Companies had the largest increase at 1.4 million.
MEDICAID ENROLLMENTPUBLIC VS. BLUE VS. OTHER
MEDICARE LOSS RATIOPUBLIC VS. BLUE VS. OTHER
2015 2016 2017 2018 2019 2020
2015 2016 2017 2018 2019 2020
chart size 3.05 x 1.0
chart size 3.05 x 1.5
Pg 5 Medicare
Co
ve
red
Liv
es
(in
Millio
ns)
Lo
ss R
ati
o
80%
85%
90%
95%
100%
0
2
4
6
8
10
12
14
2015 2016 2017 2018 2019 2020
2015 2016 2017 2018 2019 2020
Pg 6 Medicaid
Co
ve
red
Liv
es
(in
Millio
ns)
0
5
10
15
20
25
30
80%
85%
90%
95%
100%
Lo
ss R
ati
o
1. NAIC Health blanks only. Excludes NAIC Life/Accident/Health, NAIC P&C, and CA DMHC Filers. Data as of May 2021.2. Some of the market enrollment is not included, most notably those insured by Life/Accident/Health statutory filers, which needs to be considered when reviewing this chart and
others in this report.
MEDICARE ADVANTAGE
MEDICAID MANAGED CARE
2020 STATUTORY1 RESULTS BY MARKET01
2015 2016 2017 2018 2019 2020
Total Enrollment (in Millions) 37.1 39.9 43.2 44.2 44.3 47.0
2015 2016 2017 2018 2019 2020
Total Enrollment (in Millions) 13.7 14.5 15.4 16.6 17.6 19.1
We compared the reported PMPM incurred claims in Q4 2020 to expected claims based on the Q1 2020 reported PMPM claims and typical seasonal patterns from Q1 to Q4 to highlight the impact of COVID-19 on developing claims experience. Across all the lines of business, the reported PMPM claims in Q4 2020 were about 1% lower than expected, or $4 on a PMPM basis. This indicates that claim levels in Q4 2020 are roughly in line with typical levels. The difference in reported to expected change ranges from about -5% for Medicare Supplemental to 8% for Dental.
The expected Q4 2020 claims across all lines of business were estimated based on the average change in PMPM incurred claims from Q1 to Q4 as reported in 2017 through 2019. As shown in the chart below, the average Q1 to Q4 change in incurred claims PMPM was -1.5% for the period from 2017 to 2019, which we utilized as the pre-COVID-19 basis for the expected Q1 to Q4 growth rate.2 We applied the growth rate to the Q1 2020 reported incurred claims PMPM of $342 to estimate the expected claims for Q4 2020 at $337. The reported claims were $333 PMPM in Q4 2020, which is about 2.5% lower than Q1 2020 and 1.0% lower than expected claims. These slightly lower costs in Q4 2020 might be attributable to increased rates of COVID-19 experienced in many parts of the US resulting in some decreased utilization. For 2020, we saw the highest COVID-19 impact in Q2 2020 with lower impact in Q3 and Q4 2020.
Q4 2020 REPORTED CLAIMS EXPERIENCE
Incurred Claims by Line of BusinessWe performed a comparison of the expected to reported incurred claims for Q4 2020 across the major lines of business, which are summarized in the table below. In column 6 of the table, the reported less expected claims difference is positive for Dental (8.0%) and Medicare Advantage (3.7%), indicating slightly higher utilization than expected. The reported less expected is negative for Individual (4.6%), Group (0.6%), Medicare Supplement (5.2%), and Medicaid (2.9%), indicating slightly lower utilization than expected. The reported differences by line of business indicate that utilization due to COVID-19 and the timing of its return varied by line of business, as it did prior to Q4 2020.
1. NAIC Health blanks with business from 2017 to 2020 Q4 YTD only. Excludes NAIC Life/Accident/Health, NAIC P&C, and CA DMHC Filers. Data as of May 2021.2. We recognize that COVID-19 impacted March 2020 claims and therefore the Q1 2020 data point so the Q4 2020 expected claims might be understated in our analysis.
INCURRED CLAIMS PMPM – MAJOR LINES OF BUSINESSQ1–Q4 2017 TO Q1–Q4 2020
TOTAL ADJUSTED CAPITAL BY CARRIER TYPE2016 TO 2020
MARKET CAPITALIZATION:STATUTORY CAPITAL/RBC TRENDSMarket Total Adjusted Capital (TAC) increased due to continued carrier profitability. Risk Based Capital (RBC) ratios increased as TAC grew faster than RBC amounts.
2016 TO 2020 STATUTORY1 RISK BASED CAPITAL02
Capital Held • Total capital held by health companies has grown
every year since 2016, from $130.9 billion to $197.6 billion.
• Each carrier type has grown capital each year since 2016.
RBC Ratios2
• RBC ratios for all carrier types saw increases in 2020 due, generally, to better underwriting margins driving higher growth in the TAC (numerator) relative to the Authorized Control Level (ACL) RBC (denominator). Public Companies and Other Health Carriers, overall, saw RBC ratios increase a little more than 10% (or 50 percentage points), whereas, Non-Public Blues saw a 3% (31 percentage points) increase.
• Non-Public Blues consistently had the highest RBC ratios, reflecting their need to retain more capital due to their limited ability to raise capital outside of business operations.
• Publicly traded health carriers had fairly consistent RBC ratios for 2016 through 2019 before seeing an increase in 2020.
RBC RATIOS BY CARRIER TYPE2016 TO 2020
Carrier Type2020 Premium (in Billions) Major Medical
2020 Adjusted Capital (In Billions)
Average Lives (in Millions) Major Medical
2016 2017 2018 2019 2020
Public Companies 454.9 82.2 59.9 485% 493% 487% 468% 518%
Non-Public Blues 209.7 86.2 31.0 718% 815% 882% 905% 936%
Other Health Carriers 155.6 29.2 23.7 446% 459% 466% 483% 533%
All Health Carriers 820.3 197.6 114.6 552% 587% 602% 599% 647%
1. NAIC Health and Life Blanks Only, excludes NAIC P&C and CA DMHC filers, companies with less than $500 million in Accident and Health Direct Premiums from the 2020 Accident and Health Policy Experience Exhibit (AHPEE), and companies who derive less than 60% of Total AHPEE Premium from Non-Comprehensive Medical Products.
2. Yearly RBC results are not necessarily comparable to the Summer 2020 Financial Newsletter due to company acquisitions, changes in company structures, premium growth, and other factors.
2016 TO 2020 STATUTORY1 RISK BASED CAPITAL02RBC Ratios2 of Public Companies• Publicly traded companies’ RBC ratios were relatively flat over the 2016 to 2018 period, then saw a small decrease in
2019 before seeing a large increase in 2020.• The increase in 2020 is driven by favorable underwriting gains, limited ACL RBC growth, and some limitations on
dividends paid out of legal entities. We note anecdotally that some carriers have concerns that some of the favorable financial experience due to COVID-19 in 2020 could reverse with returning deferred services in 2021 which would be a reason to hold more capital at year-end 2020.
RBC Ratios2 of Other Health Carriers• Other Health Carriers often are affiliated with health systems and prefer not to tie up capital in insurance companies.
Overall capital levels have increased every year from 2016 to 2020. • Kaiser saw a decrease to their RBC ratio in 2020, unlike most other carriers.
Public Companies2020 Premium (in Billions) Major Medical
Blue over $6.5B (10 companies) 149.4 57.8 21.3 673% 766% 859% 900% 949%
Total Non-Public Blues 209.7 86.2 31.0 718% 815% 882% 905% 936%
Other Health Carriers2020 Premium (in Billions) Major Medical
2020 Adjusted Capital (in Billions)
Avg. 2016–2020 Lives (in Millions) Major Medical
2016 2017 2018 2019 2020
Kaiser Foundation Health Plan, Inc. 20.7 2.3 3.0 590% 442% 555% 520% 453%
CareSource Management Group Company 12.1 1.3 1.9 328% 335% 280% 318% 347%
University of Pittsburgh Medical Center 10.2 1.9 1.2 436% 464% 368% 391% 506%
Other over $500M Premium 112.7 23.7 17.7 438% 471% 480% 501% 562%
Total Other Health Carriers 155.6 29.2 23.7 446% 459% 466% 483% 533%
RBC Ratios2 of Non-Public Blues• RBC ratios for Non-Public Blue licensees
tend to have an inverse relationship with revenue; the lower the revenue, the higher the RBC ratio.
• 2020 slightly strayed from this pattern as the largest Blues had higher RBC ratios, on average.
NON-PUBLIC BLUES RBC RATIOS BY ANNUAL PREMIUM2016 TO 2020
1. NAIC Health and Life Blanks Only, excludes NAIC P&C and CA DMHC filers, companies with less than $500 million in Accident and Health Direct Premiums from the 2020 Accident and Health Policy Experience Exhibit (AHPEE), and companies who derive less than 60% of Total AHPEE Premium from Non-Comprehensive Medical Products.
2. Yearly RBC results are not necessarily comparable to the Summer 2020 Financial Newsletter due to company acquisitions, changes in company structures, premium growth, and other factors.
2016 TO 2020 STATUTORY1 RISK BASED CAPITAL02RBC Ratios2 of the Top Ten Companies by 2020 Premiums• The top ten companies by 2020 revenue represent 65% of 2020 medical premiums, 61% of 2020 lives, and
56% of 2020 adjusted capital of comprehensive medical carriers.
• Two of the Non-Public Blue companies in the top ten, GuideWell (Florida Blue) and Health Care Service Corporation (HCSC), have consistently carried the highest RBC ratios of the top ten.
• Most of the top ten companies saw increases to their 2020 RBC ratios.
RBC RATIOS OF THE TOP TEN CARRIERS BASED ON 2020 PREMIUMS2016 TO 2020
Top Ten Carriers Carrier Type
2020 Premium (in Billions) Major Medical
2020 Adjusted Capital (In Billions)
Avg. 2016–2020 Lives (in Millions) Major Medical
2016 2017 2018 2019 2020
UnitedHealth Public 151.3 27.5 18.2 475% 478% 476% 495% 605%
Humana Public 69.5 9.6 6.8 497% 543% 483% 434% 448%
Anthem Public 68.3 13.0 10.0 497% 509% 505% 485% 485%
Centene Public 64.6 8.8 10.6 363% 361% 393% 377% 427%
Aetna Public 57.6 11.9 6.7 569% 606% 557% 484% 551%
Health Care Service Corporation Blue 41.3 22.3 6.0 822% 1001% 1264% 1253% 1350%
Cigna Public 22.4 8.7 3.6 564% 556% 564% 528% 550%
Kaiser Other 20.7 2.3 3.0 590% 442% 555% 520% 453%
Independence Health Group Blue 19.9 2.6 2.6 366% 412% 463% 473% 491%
Total Top Ten 534.4 10.9 70.1 529% 545% 563% 549% 601%
200%
400%
600%
800%
1000%
1200%
1400%
Cigna
Total
UnitedHealthcare
Kaiser
Humana
Health Care Service Corporation
GuideWell (Florida Blue)
Independence Health Group
Aetna
Centene
Anthem
Public Companies
Other Health Carriers
Total
Non-Public Blues
RB
C R
ati
o
2016 2017 2018 2019 2020
1. NAIC Health and Life Blanks Only, excludes NAIC P&C and CA DMHC filers, companies with less than $500 million in Accident and Health Direct Premiums from the 2020 Accident and Health Policy Experience Exhibit (AHPEE), and companies who derive less than 60% of Total AHPEE Premium from Non-Comprehensive Medical Products.
2. Yearly RBC results are not necessarily comparable to the Summer 2020 Financial Newsletter due to company acquisitions, changes in company structures, premium growth, and other factors.
1. Based on 10Q and 10K segment reporting, and revenue and expense allocation estimates between insured and self-insured business. Results are indicative, but may not tie directly to other financial reports.
2. Due to a change in 10-K and 10-Q presentation in the wake of changes in their business structure in Q4 2018, Aetna and Cigna reported amounts beginning Q1 2019 are not comparable with prior quarters. The change in financial reporting presentation was caused by CVS buying Aetna in November 2018 and Cigna buying Express Scripts in December 2018, and as such, we removed the Q4 2018 amounts for these two companies.
HEALTH CARE ESTIMATED NET INCOME (AS % OF PREMIUM) – INSURED BUSINESSQ1 2017–Q1 2021
Net Income Trends – Insured Business1
• All companies, with the exception of Anthem, have reported the lowest profit margins in three years during Q4 2020. Anthem realized its second lowest profit margin in three years as Q3 2020 was its lowest. This decrease in profit margin across all companies is due to the increasing loss and operating cost ratios during Q4 2020.
• During Q1 2021, all companies saw profit margins increase back to levels seen prior to the COVID-19 outbreak due to lower loss ratios typically realized during the beginning of the year as well as operating cost ratios returning to normal levels.
• The variability in profit margins throughout 2020 and into Q1 2021 is driven by COVID-19 related impacts, including utilization changes and policyholder relief programs.
UnitedHealthcare Anthem Cigna Average (unweighted)Aetna
Op
era
tin
g E
xp
en
se R
ati
oL
oss
Ra
tio
0%
2%
4%
6%
8%
10%
12%
14%
Q32020
Q12021
Q42020
Q22020
Q12020
Q42019
Q32019
Q22019
Q12019
Q42018
Q32018
Q22018
Q12018
Q42017
Q32017
Q22017
Q12017
Q32020
Q12021
Q42020
Q22020
Q12020
Q42019
Q32019
Q22019
Q12019
Q42018
Q32018
Q22018
Q12018
Q42017
Q32017
Q22017
Q12017
Q32020
Q12021
Q42020
Q22020
Q12020
Q42019
Q32019
Q22019
Q12019
Q42018
Q32018
Q22018
Q12018
Q42017
Q32017
Q22017
Q12017
UnitedHealthcare Anthem Cigna Average (unweighted)Aetna
UnitedHealthcare Anthem Cigna Average (unweighted)Aetna
50%
60%
70%
80%
90%
100%
0%
5%
10%
15%
20%
10.3%
8.6%
8.3%
7.8%
6.6%
85.6%
83.2%
82.9%
81.8%
80.9%
PUBLIC COMPANIES’ FINANCIAL PERFORMANCEWe reviewed Public Companies’ profitability for their insured block of business and noted that margins decreased during Q4 2020 but returned to typical historical levels for Q1 2021. Loss ratios increased in Q4 2020 and returned to lower levels in Q1 2021. In addition, all but Anthem realized increases in operating expense ratios in Q4 2020 and, overall, companies saw decreases in operating expense ratios in Q1 2021 to levels consistent with 2019.
• Reported loss ratios increased to around 83% for UnitedHealthcare, 86% for Cigna, 87% for Aetna, and to 89% for Anthem in Q4 2020 likely due to seasonal patterns and some rebound of medical utilization and COVID related testing and treatment costs, as well as possibly policyholder premium relief programs.
• During Q1 2021, loss ratios decreased to around 81% for UnitedHealthcare, 82% for Cigna, 83% for Aetna, and to 86% for Anthem as a result of seasonal patterns and the decreasing effect of COVID-19 related utilization.
Estimated2 Operating Expense Ratio1
• Operating expense ratios increased in Q4 2020 compared to Q3 2020 for Aetna, Cigna, and UnitedHealthcare but decreased in Q1 2021 for all companies in this study to similar levels seen in 2019.
• The elevated expense ratios in 2020 were driven by combination of the reinstatement of the HIP Fee, premium credits provided in response to the COVID-19 pandemic to members enrolled in select Individual plans and fully insured employer customers, and membership mix changes.
OPERATING EXPENSE RATIOQ1 2017–Q1 2021
MEDICAL LOSS RATIOQ1 2017–Q1 2021
1. Based on 10Q and 10K segment reporting, and revenue and expense allocation estimates between insured and self-insured business. Results are indicative, but may not tie directly to other financial reports.
2. Anthem Q2 and Q3 2019 estimated operating expense ratio impacted by the creation of the PBM IngenioRx in Q2 2019.
PUBLIC COMPANIES’ FINANCIAL PERFORMANCE03
Pg 10 Performance
Ne
t In
com
e (
as
% o
f P
rem
ium
)8.1%
7.0%
5.2%
5.0%
6.3%
UnitedHealthcare Anthem Cigna Average (unweighted)Aetna
Op
era
tin
g E
xp
en
se R
ati
oL
oss
Ra
tio
0%
2%
4%
6%
8%
10%
12%
14%
Q32020
Q12021
Q42020
Q22020
Q12020
Q42019
Q32019
Q22019
Q12019
Q42018
Q32018
Q22018
Q12018
Q42017
Q32017
Q22017
Q12017
Q32020
Q12021
Q42020
Q22020
Q12020
Q42019
Q32019
Q22019
Q12019
Q42018
Q32018
Q22018
Q12018
Q42017
Q32017
Q22017
Q12017
Q32020
Q12021
Q42020
Q22020
Q12020
Q42019
Q32019
Q22019
Q12019
Q42018
Q32018
Q22018
Q12018
Q42017
Q32017
Q22017
Q12017
UnitedHealthcare Anthem Cigna Average (unweighted)Aetna
UnitedHealthcare Anthem Cigna Average (unweighted)Aetna
50%
60%
70%
80%
90%
100%
0%
5%
10%
15%
20%
10.3%
8.6%
8.3%
7.8%
6.6%
85.6%
83.2%
82.9%
81.8%
80.9%
Pg 10 Performance
Ne
t In
com
e (
as
% o
f P
rem
ium
)
8.1%
7.0%
5.2%
5.0%
6.3%
UnitedHealthcare Anthem Cigna Average (unweighted)Aetna
Op
era
tin
g E
xp
en
se R
ati
oL
oss
Ra
tio
0%
2%
4%
6%
8%
10%
12%
14%
Q32020
Q12021
Q42020
Q22020
Q12020
Q42019
Q32019
Q22019
Q12019
Q42018
Q32018
Q22018
Q12018
Q42017
Q32017
Q22017
Q12017
Q32020
Q12021
Q42020
Q22020
Q12020
Q42019
Q32019
Q22019
Q12019
Q42018
Q32018
Q22018
Q12018
Q42017
Q32017
Q22017
Q12017
Q32020
Q12021
Q42020
Q22020
Q12020
Q42019
Q32019
Q22019
Q12019
Q42018
Q32018
Q22018
Q12018
Q42017
Q32017
Q22017
Q12017
UnitedHealthcare Anthem Cigna Average (unweighted)Aetna
UnitedHealthcare Anthem Cigna Average (unweighted)Aetna
1. FDA Takes Key Action in Fight Against COVID-19 By Issuing Emergency Use Authorization for First COVID-19 Vaccine, fda.gov/news-events/press-announcements/fda-takes-key-action-fight-against-covid-19-issuing-emergency-use-authorization-first-covid-19
2. COVID-19 vaccinations and deaths in the United States as of June 10, 2021, https://covid.cdc.gov/covid-data-tracker/#vaccinations3. Anthem 2021 Q1 Earnings Release, Call Transcript4. Centene 2021 Q1 Earnings Release, Call Transcript5. Cigna 2021 Q1 Earnings Release, Call Transcript6. Humana 2021 Q1 Earnings Release, Call Transcript7. Molina 2021 Q1 Earnings Release, Call Transcript
COVID-19 IMPACT PER HEALTH CARRIERS Q1 2021 EARNINGS RELEASES The FDA issued its first emergency use authorization for a vaccine designed for the prevention of COVID-19 on December 11, 2020.1 Since that date, over 172 million Americans have received at least one dose of the approved vaccines.2 While the increase in availability of vaccines provides hope in the fight against the pandemic that has killed nearly 600 thousand Americans since the beginning of 2020,2 its impact is still being felt nationwide. The Q1 2021 earnings calls of major public health carriers provide some insight into the continued impact that COVID-19 has had on both the utilization of health care services and the mix of enrollment between Commercial and government-sponsored health coverage.
COVID-19 CORNER04
Q1 2021 UTILIZATIONGenerally, non-COVID utilization run rates were below normal levels during Q1 2021. While COVID-related care peaked in January for many carriers, most experienced overall utilization (inclusive of both COVID and non-COVID claims) lower than baseline. Notably, most carriers expect total utilization to return to normalized levels in the second half of 2021.
• Anthem: Saw an earlier and sharper decline in COVID hospitalizations than expected while non-COVID related care experienced a faster recovery due to the accelerated rollout of the vaccine. Non-COVID related utilization is not materially different between states that have high vaccination rates and those that do not.3
• Centene: Experienced lower than normal total utilization (including COVID-related care) during the first quarter with Q1 2021 utilization actually coming in below Q4 2020 utilization. Current guidance expects utilization to continue to be below normal through Q2 2021 before trending to normal levels during the second half of the year.4
• Cigna: COVID-19 case counts and hospitalizations declined more rapidly than expected during the first quarter and Cigna expects direct COVID-19 costs to continue to decline throughout the rest of the year with non-COVID utilization returning to normalized levels. Interestingly, preventative services including mammograms, colonoscopies, cervical cancer screenings, and childhood immunizations are already back to pre-pandemic levels.5
• Humana: Non-COVID utilization continues to run below the baseline in Q1 2021. Non-COVID inpatient admissions were down about 20%, 15%, and 10% in January, February, and March respectively. Humana expects utilization to rebound during the second quarter and to then exceed the baseline in the second half of the year.6
• Molina: Medicare and Marketplace business experienced higher than normal utilization when including the direct cost of COVID-19 (estimated impact to the Medical Cost Ratio of 400 and 500 basis points respectively) while Medicaid business actually experienced a positive financial impact from the net effect of COVID-19. January had the highest COVID-19 direct costs during the quarter, then direct treatment costs declined throughout the rest of the quarter.7
COVID-19 CORNER04• UnitedHealth Group: Total utilization was slightly below the seasonal baseline. February and March saw
COVID-related care at about half the rate experienced in January. With that said, COVID-related inpatient admissions were lower during Q1 2021 than during Q4 2020 (about 55k vs. 65k).1
Q1 2021 MEMBERSHIPMany carriers continue to see substantial increases in their Medicaid membership driven by the pause in reverification of Medicaid eligibility. Interestingly, there are varying assumptions on when the reverification/redetermination process will resume.
• Anthem: Favorability in Medicaid enrollment continues to be driven by the pause in reverifications – current guidance reflects the assumption that the pause will continue through the end of 2021.2
• Centene: Medicaid growth driven by suspended eligibility redeterminations – current guidance reflects suspensions to last thru August 1st.3
• Molina: Marketplace membership grew by about 302k during the first quarter driven by effectuation rates that were substantially higher than historical averages and lower-than-expected natural attrition rates. Growth in Medicaid is driven by suspension of redeterminations – guidance reflects suspension to continue through the end of the third quarter.4
1. UnitedHealth Group 2021 Q1 Earnings Release, Call Transcript2. Anthem 2021 Q1 Earnings Release, Call Transcript3. Centene 2021 Q1 Earnings Release, Call Transcript4. Molina 2021 Q1 Earnings Release, Call Transcript5. Combines enrollment data for Public companies from 10Qs and 10K plus non-Public enrollment from NAIC Health blanks only for individual, group fully insured and Medicaid.
31,355
End of Q3 2020
End of Q4 2020
End of Q1 2021
End of Q2 2020
End of Q1 2020
End of Q4 2019
Medicaid
Covid Corner
Me
mb
ers
hip
(in
Th
ou
san
ds)
87,929 87,862 87,085 85,746 85,244 84,965
0
20,000
40,000
60,000
80,000
100,000
End of Q3 2020
End of Q4 2020
End of Q1 2021
End of Q2 2020
End of Q1 2020
End of Q4 2019
27,185
33,269 35,085
36,176 37,502
Commercial
MEMBERSHIP (IN THOUSANDS) ANTHEM, AETNA, CENTENE, CIGNA, HUMANA, MOLINA, UNITEDHEALTHCAREEND OF Q4 2019–END OF Q1 2021
The chart below displays the changes in reported enrollment for the six most recent quarters for Commercial and Medicaid.5 The changes are consistent with those mentioned in the earnings calls: considerable increases in Medicaid compared to minor decreases in group enrollment.
If you would like a copy of our current Carrier Trend Report, please email us at [email protected].
REDUCING PREMIUMS AND EXPANDING ENROLLMENT IN THE INDIVIDUAL HEALTH INSURANCE MARKET February 28, 2019
Kurt Giesa, FSA, MAAA Peter Kaczmarek, FSA, MAAA
Reducing Premiums And Expanding Enrollment In The Individual Health Insurance Market In 2021
As we present the fourth edition of our Health Insurer Financial Insights newsletter, we continue to operate in the midst of unprecedented times. This newsletter focuses on profitability trends for public and non-public health insurers, including their claims experience through the third quarter of 2020. Section 4 provides insight into how health carriers are reporting the impact of COVID-19. Our aim is to keep you abreast of key market trends and dynamics that impact health insurer financial results. We hope you enjoy the newsletter and find it informative. Please look for our next edition in 2021.
Q3 YTD 2020 Statutory Financials – Individual, Group, Medicare, and Medicaid Markets Overall, health insurers continue to report improved profit margins in 2020. Incurred claims in third quarter were higher compared to second quarter of 2020 and are more in line with expected claims levels following the reduced levels in the second quarter. However, loss ratios remain low on a year-to-date basis due to the impact of COVID-19 on emerging claims experience.
Individual Market: MLR Rebate Trends Continuous increases in premium rates for ACA-compliant plans in the Individual market helped improve loss ratios and margins from 2015 to 2018. However, this trend also increased MLR rebates for 2019 coverage. These rebates totaled about 1.9% of earned premiums, or $1.7 billion. We estimate that the overall MLR rebate payments following the 2020 experience year to be about $3.1 billion, or 3.2% of the 2020 Individual market premiums, due to favorable COVID-19 claims experience.
Public Companies Financial PerformancePublic Companies continue to perform well. We reviewed the profitability of their insured blocks of business and noted that margins decreased, as loss ratios increased, in Q3 2020 relative to Q2 2020 as a result of increased utilization.
HEALTH INSURER FINANCIAL INSIGHTS
Consulting Actuaries
VOLUME 4 | DECEMBER 2020
IN THIS ISSUE
02
01
03
04
Individual Market: MLR Rebate Trends
Public Companies: Q3 2020 Financial Performance
COVID-19 Corner
Q3 YTD 2020 Statutory Results by Market
Health Insurer Financial Insights, Volume 4
YOU MAY ALSO BE INTERESTED IN:
FOR MORE INFORMATION ABOUT THIS REPORT, PLEASE CONTACT:
HOW CAN WE SUPPORT YOU? WE UNDERSTAND THAT ACTUARIAL ADVICE IS VALUABLE ONLY IF THE MESSAGE IS TIMELY, CLEAR AND CLIENT FOCUSED. WE LOOK FORWARD TO EXPLORING HOW OUR ACTUARIES – SPECIALIZED EXPERTS WITH DEEP INDUSTRY KNOWLEDGE – CAN HELP YOU SUCCEED.
Oliver Wyman – A business of Marsh McLennan www.oliverwyman.com
ABOUT OLIVER WYMANOliver Wyman is a global leader in management consulting. With offices in 50+ cities across nearly 30 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has more than 5,000 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh McLennan [NYSE: MMC].
The Actuarial Practice of Oliver Wyman has health, life, and property & casualty actuaries that advise financial institutions, insurance companies, regulators, and self- insured entities across a broad spectrum of risk management issues. With over 300 professionals in 20 offices across North America, the Caribbean and Europe, the firm’s consulting actuaries provide independent, objective advice, combining a wide range of expertise with specialized knowledge of specific risks.
For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.
![financial insights[1]](https://static.documents.pub/doc/80x56/577d2f431a28ab4e1eb13ff2/financial-insights1.jpg)
