Mar 1, 2023 - Health

Medicare Advantage yielded strongest margins for insurers, study finds

Illustration of a hundred dollar bill puzzle with pieces missing out of the center in the shape of a red cross

Illustration: Sarah Grillo/Axios

Health insurers' margins in Medicare Advantage were more than double those seen in other markets in 2021, reinforcing the way the program can produce strong financial returns for plans, a new Kaiser Family Foundation analysis shows.

Why it matters: Private Medicare plans are expected to draw more than half of eligible beneficiaries this year. But government payments to insurers for administering the plans could get ensnared in a politically charged fight over the program's finances.

By the numbers: Gross margins in the Medicare Advantage market in 2021 averaged $1,730 per enrollee, similar to levels seen in 2018 and 2019 before the pandemic began, per KFF.

  • That was substantially higher than margins seen in the individual ($745 per enrollee), fully insured group ($689 per enrollee) and Medicaid managed care ($768 per enrollee) markets.
  • The individual and group markets had not recovered to pre-pandemic margins by the end of 2021.
  • Gross margins are a common way to assess insurer profitability and reflect the amount total premium income exceeds total claims costs per enrollee.

Go deeper: Medicare Advantage is a lucrative and fast-growing business for insurers. UnitedHealth Group posted profits of $14.4 billion, up 20% over the prior year, buoyed in large part by increases in enrollment in MA plans.

  • UnitedHealth had more than 7.1 million Medicare Advantage members in 2022, up about 9% from members 6.5 million the year prior. It’s projected to add 900,000 more members in 2023.
  • Humana, recently announced plans to exit the commercial market to focus, in part, on its MA plans. It’s expecting at least 625,000 signups in 2023, a 14% year-over-year increase.
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