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Study: Pandemic Was Good for the Health Insurance Business

The first nine months of 2020 resulted in profit margin growth of 159 percent for the HMO industry across the state.
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Texas insurers posted improved profits in the first three quarters of 2020, according to the Texas Health Market Review. The biennial report found that COVID-19 expenses were more than offset by fewer claims for non-emergent surgeries suspended for several months. 

Researcher and consultant Allan Baumgarten has published 16 versions of the analysis, first published in 1998. The report looks at strategies and competition for health insurers and provider systems in Texas. 

Medical loss ratios for Texas health insurers fell between 2019 and 2020, fueling more substantial profit margins in 2020. Texas HMO plans had average medical loss ratios of 81.6 percent in the first nine months of 2020, five percentage points less than the same period in 2019. Profit margins for these plans grew 159 percent from 2.8 percent in 2019 to 6.5 percent in 2020.

The profits were welcome news for insurers, who feared that the pandemic would take a bite out of their earnings as well. But most of those with employer-sponsored health insurance did not lose their insurance, meaning premiums still arrived, but fewer payouts occurred. “When the COVID-19 pandemic struck in March 2020, some analysts projected large losses for health plans for two reasons: (1) that they would lose premium revenues as employers hit by the economic downturn reduced their employee benefit plans, and (2) that insurers would be swamped by large claims for inpatient treatment of many patients suffering from COVID-19,” Baumgarten writes. “For the most part, these fears were not realized. While there were additional claims for treatment of COVID-19 patients, those were more than offset in most cases by a reduction in claims for non-emergency surgeries and other procedures that were suspended for several months and an overall reduction in patients coming to hospitals and clinics for primary and acute care.”

For example, Richardson-based Blue Cross Blue Sheild’s HMO Blue Texas plan bumped up its net income from $432.5 million in the first nine months of 2019 to $1.078 billion in 2020. According to the report, Baylor Scott and White’s health plan posted a 3.4 percent net income boost, and Arlington-based Texas Health Aetna experienced an 11.9 percent net income margin. 

Medicaid HMOs increased by 15 percent in the first nine months of 2020 after declining in 2019. The increase in Medicaid usage can be linked to the economic downturn brought on by the pandemic and the suspension of eligibility verification, meaning that those who qualified for Medicaid did not have to submit employment and income information that could lead to them being removed from the program. Enrollment in Medicaid and the Children’s Health Insurance Program increased from 4.2 million to 4.6 million in 2020. The largest Medicaid HMO, AmeriGroup, added 105,000 Medicaid enrollees in the first nine months of 2020. A family of four must make less than 52,470 to qualify for Medicaid in Texas.

Medicare Advantage plans also grew steadily and increased profits. Medicare Advantage plans grew to 1.756 million people in 2020, and in Texas, 41.2 percent of Medicare beneficiaries are also in a private health plan. The national average is 39 percent. UnitedHealth Group has the largest Medicare Advantage enrollment, while Humana has the most PPO members. In total, these Medicare Advantage plans continue to be profitable, with an income of 259.6 million in 2017, increasing to 408.8 million in 2019.

Statewide, Texas HMOs reported an income of 645.4 million, 1.6 percent of underwriting revenues in 2019. HMO Blue Texas had a net income of $300.9 million or 9.4 percent of underwriting revenues, and Molina Healthcare and the WellCare/SelectCare Medicare plans also remain quite profitable. 

Individual plans, too, are on the rise in the state. In 2020, the number of people who purchased a personal plan surpassed 1 million. Ambetter/Superior, whose parent company is St. Louis based Centene, is the largest seller of individual plans in the state, with about 338,000 enrollees. HMO Blue Texas has the second most enrollees. 

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