A.M. Best Special Report: Unemployment—The Culprit Driving 2009 Health Care Results

A.M. Best Co. reports that after having a difficult 2008, health insurers continued to feel the impact of economic pressures in 2009. In 2008, earnings were impacted by a lower level of underwriting income combined with lower investment income and write-downs on investments due to the challenging investment environment. For the most part, 2009 saw the rise in unemployment as the cause of member losses in existing groups—known as in-group losses/attrition—and growth in the Medicaid managed care membership as more individuals became eligible for Medicaid. And while the financial markets rebounded during 2009, particularly after the spring, interest rates remained low, continuing the trend of lower investment income.

— Excluding Medicare Part D members, overall enrollment by publicly traded health insurers declined by 1.3% The commercial segment declined by 3.3%, or more than 3 million members year over year.

— States saw more individuals become eligible for Medicaid benefits, and as a result, Medicaid Managed Care enrollment rose almost 9% during 2009 among the publicly traded companies. The Medicaid-only carriers experienced the largest enrollment growth.

— Total revenues grew 7.4%, year over year, driven by premium and investment income growth due to financial market improvements.

— Total debt outstanding declined by 7.4%, or $2.5 billion, for the group of publicly traded companies. When the debt markets tightened in late 2008 and early 2009, many companies started to pay off debt with cash rather than refinance debt at maturity.

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