Health Insurance Industry Analysis Report

Transcription

1 Health Insurance Industry Analysis Report CONTENTS Underwri ng Results Enrollment and Premium Revenues Accident and Health Supplemental Health Care Exhibit Long-term Care Contributors NAIC Financial Regulatory Services Dan Daveline, Assistant Director Jane Koenigsman, Life/Health Financial Analysis Manager Bill Rivers, Health Financial Analysis Program Manager Disclaimer The NAIC Health Insurance Industry Analysis Report is a limited scope analysis based on the aggregated information filed to the NAIC s Financial Data Repository as of Dec. 31,, and written by the Financial Regulatory Services Department staff. This report does not constitute the official opinion or views of the NAIC membership or any particular state insurance department. Health Industry Disclosure: In some states the health industry is regulated by a Department other than the Department of Insurance. Therefore, not all health insurers may be required to file financial statements with the NAIC Na onal Associa on of Insurance Commissioners. All rights reserved.

2 Health Insurance Industry Analysis Report Health Industry at a Glance Table 1 below provides a 10-year snapshot of the U.S. health insurance industry s aggregate financial results for health entities who file with the NAIC on the health annual statement blank which represents approximately 75% of the total A&H business filed with the NAIC. For the third consecutive year, the health insurance industry experienced a decrease in net earnings; a drop of 41.7% to $5.8 billion and a decrease in the profit margin to 1.1% in compared to net earnings of $10.0 billion and a profit margin of 2.2% in. The combined ratio increased moderately to 98.7% from 97.9%. In addition to the decrease in profitability, health entities reported an 11.5% decrease in net investment income earned to $2.9 billion as the yield decreased to 1.8% from 2.1% in. Health entities reported a less than 1.0% increase in capital and surplus to $112.2 billion due to net income of $5.8 billion and paid-in surplus of $4.0 billion partially offset by $7.3 billion in dividends paid to stockholders in and unrealized capital losses of $1.8 billion. Notable items include the following: Net earned premium increased 16.4% ($73.9 billion). Total hospital and medical expenses increased 15.3% ($59.5 billion). Administrative expenses increased 37.0% ($14.4 billion). Moderate decrease in loss ratio to 85.3%. A&H direct earned premium increased 8.0% ($51.8 billion) including all statement types. Aggregate earned premium subject to the MLR reported on the SHCE, increased 3.7% ($10.2 billion). Long-term care claims increased 22.1% ($1.7 billion). Table 1 Health Entities as of December 31, (In Millions, Except PMPM) Chg Operations Direct Written Premium 15.6% $530,855 $459,274 $443,537 $418,482 $394,700 $382,376 $354,646 $331,029 $303,735 $270,726 Net Earned Premium 16.4% $524,647 $450,737 $433,211 $409,291 $385,832 $373,197 $346,161 $324,602 $298,146 $267,135 Net Investment Income Earned (11.5)% $2,932 $3,311 $3,154 $3,245 $3,421 $4,061 $4,759 $5,249 $4,452 $3,207 Underwriting Gain/(Loss) (28.9)% $6,851 $9,637 $11,675 $14,763 $12,714 $5,978 $9,092 $10,086 $11,807 $11,806 Net Income/Loss (41.7)% $5,815 $9,978 $11,744 $13,909 $12,935 $9,292 $8,417 $12,279 $12,551 $11,496 Total Hospital & Medical Exp 15.3% $448,741 $389,206 $371,947 $346,059 $326,997 $323,405 $297,746 $278,212 $252,297 $225,165 Loss Ratio (0.5) Pts. 85.3% 85.8% 85.7% 84.5% 84.8% 86.7% 86.0% 85.4% 84.4% 84.1% Admin Expense Ratio 1.4 Pts. 13.5% 12.1% 11.8% 11.9% 11.9% 11.7% 11.4% 11.6% 11.7% 11.6% Combined Ratio 0.8 Pts. 98.7% 97.9% 97.3% 96.4% 96.7% 98.4% 97.4% 96.9% 96.1% 95.6% Profit Margin (1.1) Pts. 1.1% 2.2% 2.7% 3.4% 3.3% 2.5% 2.4% 3.7% 4.1% 4.2% Net Premium PMPM 4.0% $220 $212 $205 $204 $195 $189 $186 $177 $169 $161 Claims PMPM 3.2% $189 $183 $177 $173 $166 $165 $161 $152 $144 $136 Cash Flow from Operations (21.3)% $6,394 $8,120 $13,203 $15,399 $12,201 $8,619 $10,177 $13,546 $16,128 $11,645 Enrollment 14.5% Capital and Surplus Capital & Surplus 0.9% $112,180 $111,140 $103,041 $94,642 $88,521 $77,147 $71,404 $76,025 $68,311 $59,003 Assets Net Invested Assets 3.7% $169,442 $163,439 $155,331 $145,706 $135,589 $122,475 $113,443 $119,524 $109,914 $95,531 Net Admitted Assets 11.1% $238,195 $214,328 $201,801 $188,664 $174,217 $158,506 $146,866 $148,285 $137,279 $118,630 Net Inv Inc & Realized Gain/(Loss) (2.4)% $4,527 $4,638 $4,417 $4,249 $4,814 $6,260 $1,980 $6,103 $4,827 $3,609 Investment Yield (0.3) Pts. 1.8% 2.1% 2.1% 2.3% 2.7% 3.4% 4.1% 4.6% 4.3% 3.7% Number of Companies Filed Note: Aggregate results include only health entities who file annual statements with the NAIC. As of April 4, 2015, approximately 99% of expected health entities reported.

3 Page 2 Underwriting Results Figure 1 below illustrates the decrease in both net earnings and profit margin. The decrease in the industry s underwriting results can be attributed to a 15.3% ($59.5 billion) increase in total hospital and medical expenses to $448.7 billion and a 30.1% ($16.5 billion) increase in claims adjustment expenses and administrative expenses. Administrative expenses alone increased 37.0% ($14.4 billion). However, the industry partially offset these items with a 16.4% ($73.9 billion) increase in net earned premium to $524.6 billion. The industry also recorded realized capital gains of $1.6 billion in Table 2 below provides an analysis of operations by line of business for. In terms of dollar impact, the Medicaid ($2.4 billion) and the Medicare ($1.4 billion) lines of business were the most profitable lines. Figure 2 below illustrates the increase in total hospital and medical benefits and the modest decrease in the loss ratio to 85.3% in. Historically, from year to year, the industry has reported significant increases in hospital and medical benefits. However, during, net earned premium increased at a significantly higher rate than total hospital and medical benefits. In addition, as indicated on Table 1, the industry reported a moderate increase in the administrative expense ratio to 13.5%. In Billions $16 $12 $8 $4 $0 $12.9 Figure 1 Net Income & Profit Margin (ROR) $ % 3.4% $ % $ % $ % Net Income Profit Margin 6% 5% 4% 3% 2% 1% 0% In Billions $500 $400 $300 $200 $100 $0 84.8% 84.5% 85.7% 85.8% 85.3% $327.0 Figure 2 Total Benefits & Loss Ratio $346.1 $371.9 $389.2 $ Hospital & Medical Benefits Loss Ratio 100% 80% 60% 40% 20% 0% (In Millions, Except PMPM) Table 2 Analysis of Operations by Lines of Business Comp Hospital & Medical Medicare Suppl Dental Vision FEHBP Medicare Medicaid Other Health Net Earned Premium $207,574 $8,690 $11,753 $2,148 $34,127 $130,097 $114,344 $15,807 Total Hospital & Medical Exp $175,132 $6,910 $9,132 $1,703 $31,611 $112,975 $97,695 $13,581 Claims Adj. Expenses $7,472 $378 $427 $37 $780 $4,073 $3,548 $1,043 General Admin. Expenses $25,776 $1,077 $1,680 $369 $1,834 $11,631 $10,119 $843 Total Underwriting Deductions $208,885 $8,157 $11,234 $2,109 $34,233 $128,888 $111,563 $15,494 Net Underwriting Gain/(Loss) $93 $564 $765 $178 $383 $1,395 $2,434 $863 Loss Ratio 84.0% 76.9% 76.1% 74.5% 91.3% 86.9% 85.9% 83.2% Admin Expense Ratio 15.9% 16.7% 17.6% 17.7% 7.6% 12.1% 12.0% 11.5% Combined Ratio 100.0% 93.5% 93.6% 92.2% 98.9% 98.9% 97.9% 94.7% Net Premium PMPM $344 $196 $29 $7 $395 $1,121 $376 $59 Claims PMPM $290 $150 $23 $6 $361 $974 $325 $50 Enrollment Note: Aggregate results include only health entities who file annual statements with the NAIC. As of April 4, 2015, approximately 99% of expected health entities reported.

4 Page 3 Enrollment and Premium Revenues Enrollment increased 14.5% to million due primarily to a 38.5% (9.8 million) increase in Medicaid, an 18.3% (6.2 million) increase in dental coverage, a 21.3% (4.9 million) increase in Medicare Part D, a 44.9% (4.2 million) increase in the individual comprehensive line of business, a 15.0% (3.7 million) increase in vision coverage and a 25.6% (2.5 million) increase in Medicare. These items were partially offset by a 13.4% (5.5 million) decrease in the group comprehensive line of business. Figure 3 illustrates the percentage of enrollment by line of business for. Health entities reported premium per member per month (PMPM) of $220 and claims PMPM of $189. Direct written premium increased 15.6% ($71.6 billion) to $530.9 billion. Figure 4 illustrates the mix of direct written premium for. During the last several years, there has been a gradual shift in the allocation of premium between the lines of business. In comparison to, direct comprehensive medical decreased to 40.3% of total premium from 43.0%, while Medicare increased to 24.1% from 23.1% and Medicaid increased to 21.7% from 19.4%. It appears that the shift in business concentration is due to an increase in the number of insureds becoming eligible for either Medicare and/or Medicaid as evidenced by increases in enrollment in these lines. Table 3 provides a break out of direct written premium by line of business for the last 10 years. The largest increases in written premium from are most evident in a 30.2% ($26.9 billion) increase in Medicaid, a 21.7% ($23.0 billion) increase in Medicare, and a 75.6% ($18.7 billion) increase in the individual comprehensive line of business. The group comprehensive line of business experienced a 3.4% ($5.8 billion) decrease. In comparison to 2005, the most significant increases in written premium is still in the Medicare ($94.4 billion), Medicaid ($89.2 billion) and individual comprehensive ($30.2 billion) lines of business. Figure 4 Direct Health Premium Written Figure 3 Enrollment by Line of Business 6.1% 3.5% 19.6% 5.8% 40.3% 21.7% 17.3% Comprehensive Medicare Supplement FEHBP Medicare 14.1% 13.5% Medicaid 24.1% Other 2.0% 6.4% 17.4% Indiv Comp Vision Medicare 1.7% 6.6% Grp Comp Dental Medicaid Med Supp FEHBP Other - Med Pt D Table 3 Direct Written Premium by Lines of Business Chg Individual Comprehensive 75.6% $43,388 $24,713 $23,389 $22,624 $20,690 $19,372 $18,041 $17,365 $15,174 $13,165 Group Comprehensive (3.4)% $166,375 $172,220 $174,959 $175,843 $174,692 $176,070 $174,004 $169,751 $163,890 $157, % $9,105 $8,531 $8,439 $8,138 $8,077 $7,825 $7,788 $8,334 $7,810 $7,925 Vision 19.4% $1,952 $1,635 $1,550 $1,448 $1,344 $1,354 $1,281 $1,184 $952 $885 Dental 19.6% $12,017 $10,046 $10,113 $9,587 $9,100 $8,733 $7,713 $7,200 $6,710 $6,108 (In Millions) M edicare Supplement FEHBP 6.5% $34,140 $32,061 $31,669 $31,209 $29,378 $27,784 $26,657 $24,602 $23,145 $19,691 M edicare 21.7% $128,890 $105,917 $99,981 $91,519 $81,101 $79,180 $66,080 $54,497 $45,992 $34,478 M edicaid 30.2% 19.8% $115,977 $16,900 $89,069 $14,111 $78,535 $14,194 $65,994 $11,373 $58,281 $10,278 $51,208 $10,094 $42,885 $8,286 $37,523 $9,315 $29,925 $8,785 $26,813 $1,897 Other Health

5 Page 4 Accident and Health Table 4 illustrates the insurance industry s aggregate direct A&H insurance experience for insurers filing the A&H Policy Experience Exhibit on the life, A&H, health, fraternal or property/casualty financial statements. The insurance industry reported an 8.0% ($51.8 billion) increase in direct earned premium to $696.4 billion and an 8.4% ($44.4 billion) increase in incurred claims in. These increases are most evident on the Medicaid and Medicare lines of business which, in total, represents 36.1% of total earned premium. Medicaid reported a 26.7% ($23.0 billion) increase in earned premium to $109.1 billion and a 24.2% ($18.2 billion) increase in incurred claims to $93.4 billion. Medicare reported a 7.6% ($10.1 billion) increase in earned premium to $142.2 billion and a 7.7% ($8.7 billion) increase in incurred claims to $122.2 billion. The individual comprehensive line of business, representing only 6.3% of total A&H business, reported a 68.1% ($17.9 billion) increase in earned premium to $44.2 billion and a 93.0% ($21.0 billion) increase in incurred claims to $43.5 billion. The total number of covered lives increased 6.2% (49.1 million) to million as reflected in a 46.1% (12.6 million) increase in other group care business, a 25.4% (10.9 million) increase in stop loss, a $2.4 (10.1 million) increase in the other A&H line of business, a 15.8% (6.3 million) increase in Non-U.S. Policy Forms, a 26.5% (5.8 million) increase in Medicaid, a 6.2% (3.9 million) increase in Dental coverage, and a 40.7% (3.7 million) increase in the individual comprehensive line of business. These items were partially offset by a 12.0% (6.3 million) decrease in the group comprehensive line of business. Table 4 A&H Policy Experience Exhibit as of December 31, ($ In Millions) Except Covered Lives Line of Business % of Total % Chg. Premium Earned Premium Earned % Chg. Claims Claims % Chg. Covered Lives Covered Lives Comp - Individual 6.3% 68.1% $44,173 $26, % $43,495 $22, % 12,924,357 9,185,543 Comp - Group 29.3% (4.4)% $203,818 $213,272 (5.5)% $167,104 $176,831 (12.0)% 46,225,824 52,541,655 Medicare 20.4% 7.6% $142,199 $132, % $122,214 $113, % 13,540,878 12,193,036 Medicaid 15.7% 26.7% $109,073 $86, % $93,353 $75, % 27,867,639 22,036,716 FEHBP 5.0% 7.0% $35,003 $32, % $31,939 $30,499 (7.6)% 7,356,261 7,961,022 Disability Income 3.3% 2.7% $22,801 $22, % $18,327 $17, % 71,343,932 70,426,811 Dental 3.4% 5.0% $23,705 $22, % $17,623 $17, % 66,414,094 62,515,992 Medicare Supplement 3.6% 5.8% $24,790 $23, % $19,055 $18, % 12,053,121 11,067,035 Medicare Part D 2.7% (8.1)% $19,021 $20,697 (7.4)% $15,634 $16,882 (3.0)% 19,027,751 19,611,899 Other Group Care 0.8% (3.4)% $5,750 $5,952 (10.0)% $3,908 $4, % 39,882,075 27,291,366 Stop Loss 1.8% 14.6% $12,341 $10, % $9,163 $7, % 53,750,738 42,869,636 Non-U.S. Policy Forms 1.5% (7.9)% $10,570 $11,472 (6.2)% $5,845 $6, % 46,332,535 40,005,633 Other Business 5.9% 5.2% $37,671 $35, % $24,421 $22, % 427,902, ,773,240 Total A&H Business 100.0% 8.0% $696,421 $644, % $575,394 $530, % 844,621, ,479,584 Note: Includes statement types Life, Fraternal, Health and Property & Casualty

6 Page 5 Supplemental Health Care Exhibit Table 5 illustrates the insurance industry s aggregate business subject to the ACA medical loss ratio (MLR) experience for insurers filing the Supplemental Health Care Exhibit (SHCE) on the life, A&H, health, fraternal or property/casualty financial statements. The percentage of the total business reported by those insurers who file the health annual statement blank represents approximately 83% of the total accident and health business subject to the MLR filed with the NAIC in. The insurance industry reported a 1.2% ($3.3 billion) increase in total aggregate adjusted premium earned (net of federal, state insurance & premium taxes and regulatory licenses & fees) subject to the MLR to $283.7 billion and a 4.7% ($10.7 billion) increase in total incurred claims to $220.1 billion in. This led to a 5.1 percentage point decline in the preliminary medical loss ratio 1 to 82.6% from 87.7% in. The increase in earned premium is most evident on the individual comprehensive line of business which, in Total Individual Small Group Large Group total, represents 16.5% of total earned premium with a 57.2% ($17.0 billion) increase. However, this line of business reported a 58.6% ($14.7 billion) increase in incurred claims resulting in an increase in the preliminary MLR to 89.7% from 86.3%. The large group employer comprehensive medical line of business reported a 1.5% ($2.5 billion) decrease in earned premium to $165.2 billion which represents 58.2% of total earned premium. However, this line of business reported an 11.6% ($16.8 billion) decline in incurred claims to $128.0 billion resulting in a drop in the preliminary MLR to 82.4% from 89.5% in. The small group employer comprehensive medical line of business reported a 5.6% ($4.0 billion) decrease in earned premium to $68.4 billion which represents 24.1% of total earned premium. However, this line of business reported a 14.5% ($8.5 billion) decrease in incurred claims to $49.9 billion resulting in a decline in the preliminary MLR to 78.5% from 84.5% in. Individual Small Group Large Group Small Group Large Group Adjusted Premium Earned (Net of Federal, State Insurance & Premium Taxes and Regulatory Licenses & Fees) Life 43,138,718,137 6,360,327,215 9,977,332,953 24,319,644,961 73,284, ,064 55,553, ,027,808,093 1,324,445,525 P&C 915,129,705 53,717, ,446, ,572,866 1,693,508 0 (784,236) 294,842 (37,033) 179,226,132 Health 225,297,807,377 38,488,597,622 54,033,503, ,298,898,939 47,130, ,713, ,008, ,954,181 Fraternal 234, , Total 269,351,889,696 44,902,876,370 64,339,283, ,971,116, ,108, ,555 72,483, ,842 1,030,779,587 1,912,625,838 Deductible Fraud & Abuse Life 6,131,111 1,068,845 2,194,262 2,866, P&C Health 56,239,923 7,498,121 14,030,357 34,653, ,713 Fraternal Total 62,371,034 8,566,966 16,224,619 37,520, ,549 Total Incurred Claims Life 37,877,744,495 6,130,408,790 8,326,772,216 21,501,370,420 37,524,860 (751,254) 2 21,667, ,361,473 1,127,638,848 P&C 815,754,717 48,712, ,033, ,890,015 (34,203) 0 (779,374) 106,706 (13,564) 160,839,372 Health 181,412,724,839 33,645,607,527 41,277,061, ,152,634,577 38,363,919 1,272 10,188, ,180, ,687,076 Fraternal 20,060 20, Total 220,106,244,111 39,824,748,628 49,880,867, ,983,895,013 75,854,576 (750,002) 31,077, , ,528,172 1,575,165,296 Total of Defined Expenses Incurred Life 355,658,516 37,423,793 90,893, ,443, ,907 3, , ,443,551 8,891,729 P&C 1,268, , ,852 1,015, Health 2,015,886, ,340, ,088,008 1,105,611,277 79, , ,493 5,225,712 Fraternal Total 2,372,813, ,881, ,118,730 1,321,069, ,938 3, , ,447,044 14,117,441 Preliminary Medical Loss Ratio 82.6% 89.7% 78.5% 82.4% 62.4% % 44.1% 36.2% 71.6% 83.1% 1 The preliminary MLR is not meant to represent or replicate the MLR calculated by HHS/CMS in its MLR reporting form for actual rebate purposes. 2 One Life insurer reported negative incurred claims of $1.3 million in. Table 5 Business Subject to MLR (by Statement type) Comprehensive Mini-Med Plans Expatriate Plans Student Health Plan

7 Page 6 Long-term Care Figure 5 illustrates, on a calendar year basis, the insurance industry s aggregate long-term care experience for insurers filing the Long-term Care Experience Reporting Form on the life and A&H, health, fraternal and property and casualty financial statements. The insurance industry had maintained consistent growth of long-term care insurance as evidenced by increases in the growth of earned premium as well as the number of covered lives up through. However, for, direct earned premium decreased by less than 1.0% ($14.7 million) to $11.5 billion. Claims increased more significantly by 22.1% ($1.7 billion) in. As shown in Table 6 below, the top ten states accounted for 51.7% of total direct LTC premiums led by California with $991.3 million. For these ten states, direct earned premium increased modestly by 1.6% ($91.4 million) to $5.7 billion in. New York experienced the most significant increase in premiums, up 10.5% ($88.6 million) to $933.0 million, representing 8.4% of market share. New Jersey reported a 10.6% ($43.0 million) increase to $450.8 million, representing 4.1% of market share. Florida experienced the largest decrease, down 2.6% ($26.9 million) to $597.5 million, representing 5.4% of market share. $ 14,000 Figure 5 Long-Term Care Direct Earned LTC Premiums and Claims From LTC Exhibit Form 2C Summary (2009-) and Form A- Part 2 (prior years) $ 12,000 $ 10,000 $ 10,445 $ 10,673 $ 11,260 $ 11,542 $ 11,527 $ 9,572 $ 8,000 $ 6,658 $ 6,912 $ 7,802 $ 7,841 $ 6,000 $ 4,000 $ 2,000 $ Earned Premium ($Millions) Claims ($Millions) Table 6 Top 10 Long-term Care Premium by State State Market Share % Chg $ Chg CA 8.9% (2.6)% ($26,872,021) 991,288,859 1,018,160, ,785, ,449, ,047,485 NY 8.4% 10.5% $88,604, ,991, ,386, ,748, ,041, ,861,649 TX 5.8% (1.1)% ($6,971,594) 642,232, ,204, ,794, ,009, ,950,855 FL 5.4% (12.5)% ($85,658,421) 597,512, ,170, ,474, ,242, ,752,547 IL 4.7% 4.3% $21,445, ,141, ,696, ,396, ,017, ,718,992 PA 4.3% 1.8% $8,233, ,573, ,340, ,614, ,270, ,197,390 NJ 4.1% 10.6% $43,020, ,762, ,742, ,791, ,380, ,350,674 VA 3.6% 1.7% $6,533, ,448, ,914, ,657, ,419, ,879,670 OH 3.5% 7.4% $26,475, ,626, ,151, ,574, ,893, ,728,847 MA 3.0% 5.2% $16,629, ,786, ,157, ,563, ,833, ,758,448 Total Top % 1.6% $91,438,897 $5,728,364,134 $5,636,925,237 $5,483,400,854 $5,168,558,438 $5,260,246,557 % of Total 51.7% 50.6% 50.9% 50.6% 49.7% Total Written in All States (0.4)% ($49,744,846) $11,082,722,392 $11,132,467,238 $10,764,643,446 $10,224,431,843 $10,586,998,240