Best’s Special Report: Consumers to See Relief With Lower 2020 Health Exchange, Medicare Advantage Premium Rate Increases

OLDWICK, N.J.--()--The 2020 premium rate increases for individual marketplace exchanges and Medicare Advantage (MA) are among the lowest in years, attributable to continued strong earnings in the U.S. health insurance industry, according to a new AM Best report.

A new Best’s Special Report, titled, “Consumers Finally See Relief in 2020 Premium Rate Increases,” states that the individual exchange marketplace, 2020 will be the second straight year of a lower level of rate increases, with the average rate increases in many states in the single digits. The improvement in the individual exchange marketplace performance led to a record amount of medical loss ratio rebates paid out by insurers in 2018, the highest since The Patient Protection and Affordable Care Act (ACA) was created. In prior years, product pricing was subject to a great deal of uncertainty; the implemented rate increases over the last few years combined with product modifications and stability of membership have resulted in improved profitability, and insurers are expected to pass this pricing relief on to consumers.

Furthermore, the average monthly premium for MA plans is expected to decline by 14% for 2020, and the number of plan options to increase. The health insurer fee returns in 2020, but health insurers tend to absorb it for MA due to the price sensitivity of the senior market. This could pressure margins for 2020, but overall, AM Best expects MA business to remain profitable.

U.S. health insurers’ profitability increased substantially through the second quarter of 2019, compared with the same period in 2018. Underwriting income rose by over $6 billion, or roughly 43%, to $21.1 billion, while net income was up more than 60% to $24.4 billion in first-half 2019. Performance improved for most of the industry, as nearly 60% of companies reported improved underwriting results.

The industry’s favorable performance through the second quarter of 2019 led to year-over-year capital and surplus growth of nearly 17% to $218.0 billion—the highest first-half growth in five years. The increase in capital and surplus also benefited from $2.5 billion in unrealized gains, compared with an unrealized loss of almost $900 million in the second quarter of 2018. The ongoing surplus growth has helped the health insurance industry withstand market volatility, and the higher levels of capital, combined with expectations of modest overall premium growth, may lead to some carriers adjusting pricing to gain market share. AM Best expects the majority of its rated entities to maintain high levels of risk-adjusted capitalization.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=291236.

AM Best is a global credit rating agency and information provider with an exclusive focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280
sally.rosen@ambest.com

Jason Hopper
Associate Director,
Industry Research and Analytics
+1 908 439 2200, ext. 5016
jason.hopper@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Contacts

Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280
sally.rosen@ambest.com

Jason Hopper
Associate Director,
Industry Research and Analytics
+1 908 439 2200, ext. 5016
jason.hopper@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com