Will health insurers’ strong earnings performance continue?

While hospitals’ finances have been hit hard by the coronavirus pandemic, the overall deferral of health care services by Americans has been a boon to health insurers. According to Moody’s latest report, health insurers’ earnings were up 87% over the same period last year.

“Thus far, the pandemic has been tracking most closely to our mild scenario, which projected between 0.8 – 1.0 million total hospitalizations,” the latest report states, recalling the investment advisor’s April 2020 predictions. “We estimate that cumulative hospitalizations to date have been approximately 500,000.”

Related: Top health insurers’ revenues soared to almost $1 trillion in 2019

Despite this strong performance in the first half of the year, Moody’s predicts the second half of the year will be less lucrative, due to a variety of factors. “First and foremost, the industry does not want to be perceived as taking advantage of a tragedy and profiting from the coronavirus,” analysts write. “This is especially relevant in an election year where health care is likely to receive a substantial amount of attention.”

Moreover, health insurers will face limitations as a result of the Medical Loss Ratio, which limits the amount of profit an insurer can generate relative to claims paid. To mitigate the difference, many insurers have waived cost-sharing requirements or issued rebates, and the Trump administration recently announced that it would give insurers leeway to adjust their premiums for the remainder of the year.

“Based on the evidence so far, we forecast that the industry will have a strong year, with results deliberately tempered by the various give-back programs enacted by the companies,” analysts added.

Other key takeaways:

• Commercial enrollment is down, having fallen 2.6% this past quarter, and is expected to continue its decline in the remainder of the year as layoffs and furloughs continue
• Medicare Advantage offers opportunities for insurers to grow
• Telehealth use continues to grow, offering the potential for additional cost savings
• The upcoming presidential election and ongoing challenge against the ACA both create uncertainty that could impact health insurers in the coming months
• Summer COVID spikes are moderating, decreasing the likelihood of surge-related costs

Read more: 

• The cost of disruption
• Infographic: Loss of health insurance hits some states harder
• Insurers eye time-limited COVID cost waivers, premium relief as profits soar