Press Release - DECEMBER 11, 2018

Best’s Special Report: AM Best Benchmarking Analysis Shows Strong Capital Levels in U.S. Health Insurance Amid Earnings Surge

 Bridget Maehr
Associate Director
+1 908 439 2200, ext. 5321

Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280

Christopher Sharkey
Manager, Public Relations
(908) 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
(908) 439 2200, ext. 5644


An AM Best analysis of the U.S. health insurance industry under the rating agency’s 2017 Best’s Credit Rating Methodology (BCRM) update shows that the industry remains well-capitalized, with balance sheet strength improving for many carriers as capital growth outpaces premium increases.

A new Best’s Special Report, titled, “U.S. Health Benchmarking,” discusses the impact on rated health insurers from updates to BCRM and Best’s Capital Adequacy Ratio (BCAR). The assessment has generated benchmarking statistics, which are detailed in the report. According to the report, 32% of the rated population had the strongest category of balance sheet strength. Balance sheet strength had fluctuated from 2014-2016 due to the implementation of the Affordable Care Act (ACA). However, earnings in 2017-2018 have improved considerably, driven by stabilization of the individual exchange business, favorable medical cost trends and premium growth.

The primary quantitative tool used to evaluate balance sheet strength is BCAR, which helps determine whether a company’s capitalization is appropriate; however, AM Best takes all of the balance sheet components into consideration, as the BCAR itself is not the sole determinant of the balance sheet strength assessment. Along with balance sheet strength, the key pillars AM Best uses in its credit analysis are operating performance, business profile and enterprise risk management (ERM).

AM Best views the operating performance of 57% of the U.S. health insurers as adequate. This assessment focuses on the stability, diversity and sustainability of top line growth and earnings. While health insurers generally have reported profitable underwriting results and modest to moderate premium growth, overall operating margins tend to be on the lower side.

Just more than 12% of the rated population had a business profile assessment of favorable or very favorable, owing to the highly competitive market. Market position is a particularly important factor in the business profile assessments, and AM Best views positively the market position of more than 90% of these rated insurers assessed with a favorable or very favorable business profile.

“Carriers with solid market share have the advantage of economies of scale, which can help control administrative unit costs and facilitate provider contracting,” said Bridget Maehr, associate director. “Moreover, high market share usually correlates to strong brand awareness and retention.”

Approximately 82% of the population had an appropriate ERM framework despite the challenging operating and regulatory environment since the implementation of the ACA. Still, AM Best believes health insurers’ ERM capabilities need to keep pace with a highly dynamic environment characterized by increasingly complex risks and intensifying competition.

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

For a video with AM Best Associate Director Bridget Maehr about the U.S. health benchmarking report, please visit .

To see the Best’s Market Segment Outlook Briefing on the U.S. health industry, please visit .

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.