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FOR IMMEDIATE RELEASE
OLDWICK - MARCH 03, 2021 08:15 AM (EST)
U.S. health insurance companies are well-prepared to face COVID-19-related uncertainties and other challenges in 2021, although earnings are expected to be significantly lower given a return to more-normal utilization and cost trends, according to AM Best’s annual Review & Preview market segment report.
The new Best’s Market Segment Report, titled, “Health Insurers Persevere Through Pandemic as Uncertainties Remain,” notes that health insurers’ earnings of $34.2 billion through third-quarter 2020 were higher than expected, and mainly due to delayed elective and routine care combined with the modest cost of treatment for COVID-19. Pent-up demand for medical care not received in 2020, along with an anticipated increase in morbidity resulting from delays in care and lower premium rate increases from many insurers for 2021, will temper earnings in 2021. There is also concern about the cost of treating individuals who may have lingering health impacts from COVID-19.
COVID-19-related impacts to investment income were experienced in the early months of 2020; however, the market has since recovered. Net investment gains remained positive, but declined by over 30% through Sept. 30, 2020, mostly attributable to lower interest rates and higher cash balances to support liquidity. The industry’s net investment income was $5.7 billion for the first three quarters of 2020, compared with $8.2 billion in the same prior-year period. Investment income combined with the increased underwriting earnings have been accretive to capital and surplus, which rose by more than 9% at year-end 2019 and over 12% through third-quarter 2020. AM Best notes that the favorable earnings trend over the past few years have resulted in the continued improvement in the level of risk-adjusted capitalization.
AM Best is maintaining its stable market segment outlook on the U.S. health insurance industry, and expects that most carriers will maintain more-than-adequate risk-adjusted capitalization to withstand any marketplace volatility in 2021. Even if consumption of medical services increases substantially compared to 2020 and exceeds historical levels, health insurers have strengthened their capital positions and should be able to withstand any near-term pressure that may occur.. However, there are still numerous unknowns, and the effectiveness of the vaccine will be the main determinant for the return to normalcy. AM Best will continue to monitor and discuss these items with health insurance companies.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=306419 .
A video interview about this market segment report with AM Best Senior Director Sally Rosen and Director Doniella Pliss is available at http://www.ambest.com/v.asp?v=ambrphealth321 .
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.