Best’s Commentary: Medicare Advantage Utilization Up in Second Quarter 2023

OLDWICK, N.J.--(BUSINESS WIRE)--The two largest Medicare Advantage (MA) insurers have separately noted increased member utilization trends for the second quarter of 2023, signaling a potential trendline that could pressure the health insurance sector’s overall profitability going forward, according to a new AM Best commentary.

UnitedHealth Group Inc. and Humana Inc. each commented earlier this month about the increased MA utilization, which occurred after carriers in the MA program had already set rates for the 2024 calendar year. The Best’s Commentary, “Medicare Advantage Utilization Up in Second Quarter 2023,” states that the MA line of business accounted one third of the health insurance sector’s profitability in 2022.

“Given the growing share of MA earnings in the overall industry’s balance, a deterioration in MA profitability would negatively impact overall industry results,” said Sally Rosen, senior director, AM Best. “AM Best believes that the health insurance industry and the MA segment will remain profitable in 2023, although 2024 profitability may be pressured.”

UnitedHealth Group had commented on the rise in utilization for outpatient services, particularly in MA, at an investor relations event. The increase appears to be driven by pent-up demand and not by an increase in severity or diagnosis. Claims were largely for hip, knee, and cardio-related procedures. Humana issued a statement that it was seeing increased utilization in claims for emergency room, outpatient surgeries, and dental services, as well as inpatient claims that diverge from seasonal patterns.

Both companies have indicated that they expect the higher level of utilization to persist over the near term and not be quickly resolved, according to the report. Furthermore, they expect full-year results to fall in within their previously stated guidance, but their loss ratios will likely be at the upper end of ranges.

“Given that these two companies write MA throughout the country, these trends may be widespread, with some variation by state,” said Jason Hopper, associate director, AM Best. “MA expenses related to hospital and medical benefits, other professional services, emergency room visits, and prescription drugs have all increased by double digits in the last two years, exceeding premium growth in 2021 and dampening profitability.”

To access the full copy of this Best’s Commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=333095.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.