Press Release - OCTOBER 30, 2017

Best’s Special Report: While Medicare Advantage Sector Balloons, Margins Remain Squeezed

 Jason Hopper
Associate Director
Credit Rating Criteria – Research and Analysis
+1 908 439 2200, ext. 5016

Bridget Maehr
Senior Financial Analyst
+1 908 439 2200, ext. 5321
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


Net premiums written in the highly competitive Medicare Advantage (MA) sector have nearly tripled to $187.5 billion in 2016 from $69.9 billion in 2007, according to an A.M. Best special report, although margin pressure persists post-The Patient Protection and Affordable Care Act (ACA).

The Best’s Special Report, “Medicare Advantage – Highly Concentrated; Suppressed Margins,” states that double-digit premium growth rates have been the norm over the past 10 years, reaching as high as 22% in 2011 and 20% in 2014. The consistent growth in MA products increased the segment’s share of total industry net premiums written (NPW) to 23.9% in 2016 from 16.6% in 2007. However, MA’s share of total NPW has been relatively flat recently, owing to the substantial growth in Medicaid premiums.

The MA market is fairly heavily concentrated, as the top three players—UnitedHealth Group, Humana Inc., and the Kaiser Foundation Group of Health Plans—account for 50% of MA enrollment, and the top 10 players account for over two-thirds of the segment’s enrollment. The population used in this report consists of insurers that filed an NAIC health annual statement and a California Department of Managed Health Care statement. Entities filing the NAIC life annual statement were excluded.

Underwriting margins rebounded somewhat in 2016 following widespread deterioration in 2013-2015, as the ACA negatively impacted results and created rate pressure. The ACA also changed the methodology used to calculate payment rates to MA organizations beginning in 2012, which led to annual decreases in payments to insurers. Other various legislated and regulatory changes also have impacted the federal government’s payments to insurers offering MA plans.

The MA market will continue to evolve, with the pressure on revenue increasing owing to the ACA, the competitive market and other regulatory changes. Health care policy discussions in Washington, D.C., also have been ongoing, with legislative proposals to amend the ACA failing to move forward. However, those bills included provisions that could have impacted the MA sector. A.M. Best believes insurers need to be vigilant with regard to these risks and how changes could impact their MA businesses.

To access the full copy of this special report, please visit .

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.