Mid-Year 2023 Health Insurance Segment Profitability


October 5, 2023

In this brief, Mark Farrah Associates (MFA) compared second quarter, year-over-year profitability for the Individual, Employer-Group, Medicare Advantage, and managed Medicaid health insurance segments. Financial insights were gleaned from aggregated 2Q22 and 2Q23 National Association of Insurance Commissioners (NAIC) statutory financial data from MFA’s Health Coverage Portal™.

Individual Segment Performance

According to financial statements filed by insurers and estimated by Mark Farrah Associates, enrollment in individual medical plans totaled approximately 19.5 million, as of June 2023, as compared to 17.7 million a year ago. This gain of over 1.8 million members builds on the growth experienced by the segment during the 2020 through 2022 period.   

For the second quarter 2023, premiums earned increased 13.6% while health care services (medical expenses) incurred grew 12.9% from second quarter 2022. On a PMPM (per member per month) basis, which accounts for changes in membership and reporting plans, premiums increased 2.4%, while growth in medical expenses was 1.8%. Through the first two quarters of 2023, the average medical expense ratio for the individual segment was 82.4%, as compared to 82.9% the previous year.   


GuideWell, CVS & Elevance all reported financial results showing a lower medical expense ratio at the end of 2Q23, as compared to 2Q22. With premium growth outpacing medical expenses, GuideWell reported the largest decline in their medical expense ratio, dropping to 82.7% from 85.7% in 2Q22.  HCSC reported a 5.1% increase in medical spending on a PMPM basis, which was partially offset by a 1.8% increase in premiums PMPM, leading to the largest reported increase in in the average medical expense ratio amongst the leading plans. HCSC’s 81% medical expense ratio is up from 78.4% from a year ago.


Employer-Group Segment Performance

Health insurance companies in the Employer-Group risk segment reported 45.2 million members, as of June 30, 2023, down 2.3% from June 30, 2022. This decline is in line with the 2.1% drop experienced between 2Q22 and 2Q21. For health insurers, profitability has decreased slightly for 2023. For the second quarter 2023, premiums earned increased 1.7% and medical expenses increased 2.1% from second quarter 2022. On a PMPM basis, premiums earned have increased 4.5% over 2Q22, while medical expenses grew by 4.9%. Growth in premium was slightly outpaced by the increase in medical expenses, moving the average medical expense ratio for this segment up to 84% for 2Q23, from 83.7% in 2Q22.

While the segment may be experiencing slightly increased medical expense ratios, three of the segment leaders are reporting lower ratios so far for 2023.  Elevance, boosted by a 7.9% increase to premiums PMPM, reported financial results indicating a 78% medical expense ratio. While UnitedHealth reported similar increases to premiums, resulting in a 77.4% medical expense ratio which is the lowest amongst the leading plans. BCBS of MI’s 82% medical expense ratio dropped from 83.5% in 2Q22.  HCSC experienced the largest increase in its medical expense ratio due to a 6.3% increase in medical expenses PMPM.



Medicare Advantage Performance

Medicare Advantage (MA) segment growth is continuing at a rapid rate. According to CMS Medicare Advantage enrollment reports aggregated by MFA in Medicare Business Online™, total Medicare Advantage plan enrollment was approximately 32.1 million: a growth of more than 2.3 million members since last June. Health insurers continue to invest in MA growth opportunities for increased enrollment, revenue, and profits as the number of people entering retirement increases each year. Year-over-year second quarter profitability for this segment, like the Group segment has decreased slightly. For second quarter 2023, premiums earned increased 15.2% and medical expenses increased 15.8% from second quarter 2022. On a PMPM basis, premiums earned have increased 5.8% over 2Q22, while medical expenses grew by 6.4%. The growth in premium, which was greater than the increase in medical expenses, pushed the average medical expense ratio for this segment up to 85.9% for 2Q23, from 85.4% in 2Q22.


Turning our attention to the segment leaders, Centene, and Humana both reported financial results indicating a decrease for their medical expense ratios. For Centene, a 9.7% increase to premiums on a PMPM basis dropped the ratio to 83.9%, second lowest to Humana.  While Humana’s 4.5% increase in premiums PMPM is below the segment average, it more than offset the 2.7% increase in medical expenses PMPM, driving their medical expense ratio down to 83.2% CVS, while benefitting from a 7% increase in premiums PMPM, reported a 12% increase in medical expenses PMPM leading to the largest increase to their medical expense ratio amongst the segment leaders.


Managed Medicaid Performance

Centers for Medicare & Medicaid Services (CMS) reported Medicaid and CHIP membership of 92.6 million for June 2023, up from 89.3 million in members from June 2022. 

For year-to-date second quarter 2023, premiums earned increased 5.7% while medical expenses incurred increased 6.5% from second quarter 2022. On a PMPM basis, premiums earned decreased 1.1% over 2Q22, while medical expenses decreased .3%. The decrease in premiums PMPM outpaced the decline in medical expenses PMPM, pushing the medical expense ratio up to 87.3% in 2Q22. 


Three of the five segment leaders continued to report financial results leading to a medical expense ratio below the segment average of 87.3%. Centene experienced the largest change in their medical expense ratio, growing from 85.6% in 2022 to 89.6% in 2023. This increase was due to increases in medical expenses and a decrease in premiums on a PMPM basis. Independence Blue Cross continues to report a higher than the segment average medical expense ratio at 94.0%, down from 94.9% in 2Q22.




So far in 2023, on a consolidated level, health plans are reporting an 87.6% medical expense ratio, which is up from 86.5% at the end of June 2022. Rising medical expense ratios will negatively impact payer profitability and therefore it is no surprise that the increase is a driving factor in the reported 7.2% decrease in underwriting gains through June 2023 vs 2022.  Mark Farrah Associates will continue to analyze and report on important health insurance segment performance and related topics. Stay tuned for future analysis briefs with valuable insights about the health care industry.

About Our Analysis

Medical expense ratio is calculated by dividing health care costs/claims incurred by premiums earned. This ratio indicates the amount of premium dollars spent on medical expenses. The higher the ratio, the less room there is for the plan to pay for its administrative costs, potentially impacting profitability. Per member per month (PMPM) calculations are also used to determine the amount of premium dollars earned and the amount of medical costs incurred for each member on a monthly basis. These calculations are performed by dividing premiums or medical claims incurred by the number of reported member months for the plan.

Data for this analysis was sourced from Mark Farrah Associates’ Health Coverage Portal™, Quarterly Exhibit of Premiums, Enrollment & Utilization (EPEU) as reported in the NAIC Financial Statements and the NAIC Statement of Revenue and Expenses. Approximately 80% of the health insurance market is represented within the exhibit. Managed Medicaid plans & California HMO plans that do not report to the NAIC, along with NAIC-reporting Life, Accident & Health, and Property & Fraternal Insurance plans do not file the exhibit. To improve the accuracy of our assessment, premiums earned, and member month data was estimated based upon the NAIC Statement of Revenue and Expenses due to incomplete or erroneous EPEU reporting by a small number of plans.

About Mark Farrah Associates (MFA)

Mark Farrah Associates (MFA) is a leading data aggregator and publisher providing health plan market data and analysis tools for the healthcare industry. Our product portfolio includes Health Coverage Portal™, County Health Coverage™, 5500 Employer Health plus, Medicare Business Online™, Medicare Benefits Analyzer™, and Health Plans USA™. For more information about these products, refer to the informational videos and brochures available under the Our Products section of the website or call 724-338-4100.

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