Best’s Market Segment Report: AM Best Maintains Stable Outlook on US Health Insurance Segment

AM Best has maintained its market segment outlook for the U.S. health insurance segment at stable, citing among other factors solid levels of capitalization and profitability despite declining underwriting results.

In its Best’s Market Segment Report, “Market Segment Outlook: US Health Insurance,” AM Best states that the health insurance industry reported favorable overall earnings supplemented by positive net investment income in 2023 while positioning plans to navigate narrowing profits margins in certain product lines. This trend continued through the first half of 2024, although declines in underwriting income were offset by a rise in net investment income and realized capital gains. Overall underwriting income in 2024 is expected to be lower, driven by declining results in Medicare Advantage (MA) and Medicaid managed care, though offset by favorable earnings in the commercial segment, which in 2023 were the highest in three years. Growth in the individual ACA segment has helped improve the commercial segment’s results, along with fewer COVID-related claims and higher rate increases to reflect greater medical cost trends.

“The overall commercial group segment has not experienced substantial enrollment gains, but membership growth has been helped by the individual segment, which gained enrollment due to a shift in members from Medicaid, for which some individuals are no longer eligible because of redeterminations,” said Jennifer Asamoah, senior financial analyst, AM Best.

The report notes that health insurers are seeing cost pressures from expensive pharmaceuticals as well as gene therapies and other specialty drugs. The increased usage of high-cost specialty pharmaceuticals to treat a growing number of medical conditions is also elevating pharmaceutical spend.

“Innovative new specialty drugs and GLP-1s are unlocking new possibilities for patients but are resulting in cost pressures for health insurers, as are gene-therapy drugs that can be required for lifelong treatment,” said Timothy Willey, financial analyst, AM Best. “The lack of competitive alternatives to many of these drugs has allowed prices to remain elevated; for example, generic alternatives to GLP-1s are not expected until at least 2026.”

Profitability in the Medicare Advantage and Medicaid managed care lines of business may fall to levels below historical norms in 2024, but overall, AM Best expects the U.S. health industry to remain profitable in 2024, as well as 2025, although net income may decline.

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=349059.

To view a video with AM Best Senior Financial Analyst Jennifer Asamoah about the market segment outlook for the U.S. health insurance segment, please visit http://www.ambest.com/v.asp?v=outlookushealth1124.

Leading AM Best analysts will review 2025 market segment outlooks for the U.S. insurance industry’s major segments, the global reinsurance industry and the delegated underwriting authority enterprises (DUAE) segment in an online briefing scheduled for Tuesday, Dec. 10, 2024, at 10 a.m. (EST). To register for the complimentary briefing, please go to http://www.ambest.com/conference/USMB2025.

To view current Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.

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.

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