Best's Market Segment Report: COVID-19 Depresses U.S. Medicare Supplement Claims, Federal Legislation Could Dampen Revenue

Net premiums earned for the Medicare supplement insurance lines of business have climbed 64% in slightly less than a decade, reaching $33 billion in 2020, according to a new AM Best report.

The Best's Market Segment Report, titled, "U.S. Medicare Supplement: COVID-19 Depresses Claims, MACRA Could Dampen Revenue," notes that the net premium increase exceeded the enrollment expansion, which has increased 37% from 2011 to reach 14.4 million lives covered.

As the senior population in the United States continues to grow at an increasing rate, insurers in the Medicare supplement segment are likely to see continued, and possibly more rapid, growth opportunities in the coming years. However, the market is highly saturated and extremely competitive.

Much like writers of other health insurance products, Medicare supplement writers saw a substantial reduction in utilization and claims resulting from delayed elective and routine care in 2020, owing to the COVID-19 pandemic, with a slower return to normalized utilization than traditional health/medical insurance, as seniors were somewhat reluctant to return to doctors' offices.

"This trend of lower utilization and claims among seniors has been on the rise through 2021, as the senior population was among the first groups to be vaccinated and provider visits are normalizing," said Joseph Zazzera, director, AM Best.

The decline in utilization from the COVID-19 pandemic resulted in many carriers reporting favorable results for 2020. In addition, 48 states reported a decline in medical loss ratios for 2020, compared with their previous nine-year average.

Another factor coming into play for this segment is full enactment of The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Those newly eligible for this Medicare supplement coverage will no longer have the option of purchasing two higher priced plans (Plans F and C), and the ensuing enrollment shifts could pressure revenue for Medicare supplement writers.

A demographic shift for Medicare supplement has generally been favorable for the product, as nearly 20% of the U.S. population will be over age 65 by 2025, up from roughly 15% in 2015. As more people become eligible for Medicare, enrollment, sales, and premium trends will all likely grow, with the addition of younger seniors to the mix of claims experience, for both MA and Medicare supplement writers.

Much of the Medicare supplement line's growth has been driven by the largest carriers, as the segment is highly concentrated. Ten writers captured more than 70% of enrollment overall in 2020 and generated almost as much in premiums earned.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=315055.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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