In 2023, publicly traded health insurance companies in the US experienced continued growth, with total GAAP revenue increasing by 10.4% to $1.07 trillion. However, a new report from AM Best suggests that future profitability may face challenges as government programme returns to normal levels.

Titled “Revenue Grows but Margins Are Pressured for US Publicly Traded Health Insurers,” the report highlights that half of the 10 insurers studied reported double-digit premium growth in 2023, led by Oscar Health, Inc. with a 46.9% increase.

The overall population also saw a 28.5% rise in investment income. Net income reached $45.3 billion, marking a 6.8% increase from 2022, following a 12.5% surge the previous year.

The report attributes pressure on Medicare Advantage (MA) earnings to reduced reimbursement rates from the Centers for Medicare & Medicaid Services, alongside increased medical claims and utilisation. Medicaid managed care business is experiencing a significant decline in enrolment, potentially leading to a worsening risk pool as eligibility redeterminations are finalised.

Kaitlin Piasecki, Industry Research Analyst, AM Best, noted: “With medical costs continue to rise across the United States, insurers have been raising premium rates and are likely to continue doing so in 2024 to maintain favourable earnings.”

“Overall earnings for companies solely operating government programmes could be challenged in 2024, but these companies should remain profitable,” commented Jason Hopper, Associate Director, Industry Research and Analytics, AM Best.

“Medical management of those with chronic conditions, as well as quality programmes and related bonus payments, will be extremely important for sustained earnings for these health plans. For plans operating in all business segments, commercial business margins will become a greater focus given the likely earning declines in Medicare Advantage and Medicaid managed care,” further added Hopper.