KFF analysis reaffirms payers' strong financial performance amid COVID-19

A new analysis from the Kaiser Family Foundation reaffirms an ongoing trend in the industry amid the coronavirus pandemic: insurers' strong financial performance.

Despite the fact that many health plans are waiving the costs associated with COVID-19 testing and treatment, payers across most markets included in the study saw higher margins compared to 2019 and saw those margins increase over the course of the year.

Gross margins for group market plans went up by 22% over the first half of 2020, according to the study, an increase of $20 per member per month. Margins in Medicare Advantage (MA), which already tend to be higher than for other types of insurance, increased by 41% compared to 2019, or about $64 per member per month.

Margins typically grew more gradually prior to the pandemic, according to the report.

"Although we cannot measure profits directly, all signs suggest that health insurers in most markets have become more profitable so far during the pandemic," the researchers wrote.

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Another sign of how well insurers are doing through the pandemic is declining medical loss ratios, according to the study. Only for the individual market did MLRs hold steady at 72% compared to 2019, though these ratios were already quite low, and insurers are likely to issue record rebates.

The MLR among MA plans declined from 85% to 80%, and it declined from 81% to 78% in group plans, according to the study.

Insurers are obligated to pay rebates for these excess funds; in MA, they'll be required to pay back any funds under 85%, and individual and group plans must meet thresholds outlined in the Affordable Care Act (ACA).

Rebates are calculated based on three years of performance, so in 2021 would include data from 2018, 2019 and 2020, according to KFF.

"Unless these patterns change substantially in late 2020, ACA medical loss ratio rebates in 2021 likely will be exceptionally large across commercial markets," the researchers said.

Insurers did warn across the board that their strong performance in the first half of the year would likely be balanced out to some degree by an increase in care utilization.