Health Insurers Adapt to Challenging Environment

For health insurers, 2011—and the new and ongoing regulations and requirements that went along with it—proved to be a challenging year. However, A.M. Best says most health insurers fared well and operating results remained strong due to a continued trend of low utilization. While utilization was lower for the second consecutive year, overall earnings were impacted by the minimum medical loss ratio (MLR) requirement, which did impact margins for some companies, but most adjusted pricing to comply.

Another requirement that will continue to challenge health insurers is the rate-reasonableness requirement—mandating that individual and small-group market rate increases of 10 percent or more need to be actuarially justified—which went into effect Sept. 1, 2011. The rating agency expects that for 2012 and beyond, margins may compress as health insurers are confronted with the full-year impact from this requirement while utilization slowly rises.

Health insurers continue to keep their eyes on these issues and are contemplating strategies—such as marketing to individuals, growth in Medicaid, and ways to streamline processes and lower administrative costs— for the future. A.M. Best says health insurers and providers have a renewed interest in cooperation and improved coordination of care, and insurers are studying and experimenting with reimbursement methods that are based upon care management and outcomes.