OLDWICK, N.J.--(BUSINESS WIRE)--The U.S. commercial health segment’s share of overall medical premium has declined steadily in the past decade, to under 40% in 2019 from 56% in 2009; however, earnings remain favorable, according to a new AM Best report.
The Best’s Special Report, “U.S. Commercial Health Premium Flattens, Enrollment Continues to Slide,” states that net premiums written (NPW) for commercial products have grown by more than 40% since 2009, to $385 billion in 2019, although premium trends have flattened in 2020 due to the COVID-19 pandemic. According to the report, most health insurers indicated that individuals and groups were sticking with their existing carriers during the crisis, which has dampened new sales but has had a positive impact on overall persistency. Given the rapid growth in government programs, AM Best expected the drop in the commercial market’s share of overall total medical premium, which includes Managed Medicaid, Medicare Advantage and the Federal Employees Health Benefits Program.
Enrollment attrition due to the pandemic has been less than expected in 2020, but is likely to accelerate as the pandemic continues, especially if some of the temporary furloughs become permanent layoffs. Additionally, eligibility for ACA marketplace subsidies is based on annual income, not current income, which makes those who have lost their jobs during the pandemic ineligible for a subsidy. An unsubsidized policy may be unaffordable for many, especially for individuals facing significant declines in income.
Enrollment across the individual and employer group markets generally have seen reduced levels since 2015. Individual membership peaked in 2015 on the heels of implementation of the Patient Protection and Affordable Care Act (ACA) in 2014, but enrollment since has been on a slow decline. The decline in the fully insured employer group membership came in two stages: first as large groups moved to self-insured products from fully insured, followed by a wave of interest by small employer groups.
Earnings have been consistently profitable for the commercial health segment in recent years. For the fully insured employer group, AM Best expects increased demand for administrative services only and stop-loss products to lead to contracted margins, but large group premium still has risen consistently the last five years. Premiums will be affected when companies report full-year 2020 results, as many of them have been offering premium credits during the pandemic. Additionally, AM Best has been hearing from its rated companies that rate increases for individual and small groups are likely to be in the single digits, further dampening premiums. Deferred utilization, elective surgeries and the cost of COVID-19 testing and treatment are all factors affecting renewal rates and are being monitored closely by insurers.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=304877.
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