Health insurers likely to be hit by slowing economic growth and high inflation, albeit modestly, in August Report Shown by financial services firm Moody’s.
Unlike hospitals, insurers will be less affected by supply chain issues, higher interest rates and labor shortages. However, Moody’s said insurers that own hospital systems, clinics and medical practices could face increased costs if the labor shortage persists. This includes UnitedHealth Group, Humana and Highmark Health.
slow economic growth
Lagging economic growth could lead to job losses, which would lead to lower business enrolments. The report compared the phenomenon to the 2008 recession, when individuals with commercial insurance accelerated their use of health care for fear of being laid off. This has led to increased claims and increased costs for insurers.
“If economic growth continues to slow and layoffs increase, we expect a similar increase in utilization today,” the report said. “Slowing economic growth could also hurt the industry’s investment performance and make it harder for insurers to raise funds. funds.”
However, Moody’s cited two reasons why insurers are now in a better position than they were in 2008:
- Medicaid and Medicare Advantage are now larger than they were in 2008, which will soften the blow of any unemployment-related drop in enrollment. Enrollment in Medicaid and Children’s Health Insurance reached about 88 million in March, compared with 50 million in 2008. Medicare Advantage has more than tripled in size since 2008, with more than 26 million members, Moody’s said.
- Compared to 2008, health insurers now offer more diverse services. Many companies own non-insured assets, such as pharmacies and health information services. This includes UnitedHealth, Cigna, Humana and Elevance Health.
inflation
Inflation could challenge health insurers, albeit not as badly as other industries. Moody’s said insurers have more flexibility because health insurance is renewed annually. Premiums are repriced each year to take into account medical inflation, expected medical costs and utilization levels.
“Because medical expenses make up about 85% of premiums, and premiums make up the majority of revenue for nearly all health insurers, inflation should be manageable if medical expenses are estimated correctly,” the report said. “If medical expenses are incorrectly estimated, The industry can adjust within a year.”
But while it can be managed in the short term, inflation lasting two years will be more difficult to deal with. When inflation persists, providers demand higher reimbursement from commercial insurers because they typically receive less reimbursement from Medicaid and Medicare Advantage.
“If the government does not increase reimbursement enough to cover inflation, suppliers will seek higher commercial reimbursement to cover the difference,” Moody’s said.
When this happens, business premiums may grow faster than inflation. Since insurance is not required for small businesses with fewer than 50 employees, some businesses may waive insurance. These smaller companies account for about 25 percent of all workers, according to the U.S. Census Bureau.
“As a result, inflation may indirectly put downward pressure on business admissions, a key driver of profitability in the industry,” the report said. “With both higher unemployment and higher inflation, pressures on business admissions are likely to be even higher. Big.”
Photo: Claude Nakagawa, Getty Images
