Health Insurers Profit from Rise in Unemployment
by Weiss Ratings | July 18, 2011
It’s not the health insurance industry’s fault so many people are unemployed. But insurer’s profits are up, and the likely cause is the shift in insurance enrollment from group health to Medicaid.
While we can’t say for sure that the shift is due to folks losing jobs, losing employee insurance and having to sign-on for alternative coverage, we think it’s a pretty good bet. And the change in enrollment has definitely been profitable for health insurers.
Here’s the scoop.
Profits of the nation’s health insurers rose dramatically for comprehensive group insurance as 3.3 million employees dropped coverage in 2010 according to a new study of 586 health insurance companies1 by Weiss Ratings, the nation’s only provider of health insurance company ratings.
At the same time, Medicaid enrollment rose 1.6 million, and gross profits2 went up 43.7% for that line of business. Medicaid is a government program administered by private insurers.
“Insurers have benefited from the deteriorating job market,” commented Gavin Magor, senior financial analyst at Weiss Ratings. “As people lost their jobs and premiums increased on the remaining employees, profit margins grew.”
Insurers benefited from a 7.1% increase in premiums earned per member but only a 3.7% rise in medical claims. As a result, the gross profit margin on group policies grew a healthy 29.8% to $610 per member. Likewise, the gross profit margin on the Medicaid line of business grew 32% to $372 per member.
Overall, the industry reported a 15.4% increase in gross profits after medical expenses were deducted from premiums across the six major lines of business.
The following table shows the changes in health insurance enrollment and gross profitability by type of health insurance coverage:
% Change in Enrollment and Gross Profits Per Member
In reviewing enrollment for the major lines of health coverage, Weiss found that Medicaid
had the largest increase. Individual coverage rose by 502,000 new members during 2010.
Federal Employees (FEHB) and Medicare also reported increases, enrolling 625,000 and
251,000 new members respectively, while group insurance enrollment fell by 3.3 million
members to 44.6 million enrollees. Overall enrollment was static, rising just 0.4 million.
For more information on the Weiss study and for a complete list of Weiss Ratings’ strongest and weakest health insurers, visit www.weissratings.com/healthlists.
- Excludes California health insurers.
- Gross profits are premium income less medical expenses before subtracting administrative expenses and investment income.