This newsletter focuses on market profitability and recent MLR rebate activity for public and non-public health insurers. 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.
1Q-Q3 2019 Statutory Financials – Individual, Group, Medicare, and Medicaid Markets:
We summarize the profitability trends of carriers with third quarter 2019 year-to-date information. We also summarize the enrollment and loss ratio trends in the individual, group, Medicare, and Medicaid markets. Overall pre-tax margins have remained stable in 2019 for the major market segments with the exception of the Non-Public Blues segment which reported slightly increasing loss ratios and a decline in profitability from its peak in 2018.
Individual Market: MLR Rebate Trends
Continuous increases in premium rates for ACA plans in the individual market helped improve insurers loss ratios and margins from 2015 to 2018. However, this trend also increased MLR rebates for 2018 coverage that insurers had to pay back in 2019 rebates. These rebates totaled about 0.8% of earned premiums, or $770 million. We look closer at the ACA loss ratios and discuss how MLR rebates will likely continue to impact insurer margins in the next few years.
Public Companies Financial Performance
Public health insurers continue to perform well. We reviewed the profitability of their insured blocks of business and noted that margins remained strong, as loss ratios and operating expenses generally improved or remained in check for the 15 quarters from Q1 2016 to Q3 2019.
M&A Corner: Centene/WellCare Merger
Centene Corp. and WellCare Health Plans Inc. first announced their agreement to merge on March 27, 2019. The deal, valued at $17.3 billion, continues the trend of consolidations among major healthcare companies. The transaction has received final approval from the Federal Trade Commission and the US Department of Justice after the companies completed all regulatory requirements as of January 21, 2020.
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