Weiss Ratings: Health Insurers Profit from Rise in Unemployment

Jupiter, Florida (July 19, 2011) — Profits of the nation’s health insurers rose dramatically for comprehensive group insurance as millions of employees dropped coverage in 2010, according to a new study of 586 health insurance companies1 by Weiss Ratings, the nation’s only provider of ratings on the health insurance industry.

The nation’s health insurers earned an additional $4.7 billion in gross profits2 on comprehensive group insurance, thanks largely to reduced costs, as 3.3 million employees left their companies and dropped coverage in 2010, often due to rising joblessness.  

At the same time, rising unemployment may have been a key factor in the enrollment growth in Medicaid, which generates earnings for the private insurers that administer the program for the government.  As Medicaid enrollment rose 1.6 million, health insurers enjoyed a 43.7% jump in gross profits for that line of business.

“Insurers have benefited from the deteriorating job market,” commented Gavin Magor, senior financial analyst at Weiss Ratings.  “As people lost their jobs and premiums increased on the remaining employees, profit margins grew.”

Insurers benefited from a 7.1% increase in premiums earned per member but only a 3.7% rise in medical claims.  As a result, the gross profit margin on group policies grew a healthy 29.8% to $610 per member.  Likewise, the gross profit margin on the Medicaid line of business grew 32% to $372 per member. 

Overall, the industry reported a 15.4% increase in gross profits after medical expenses were deducted from premiums across the six major lines of business.
The following table shows the changes in health insurance enrollment and gross profitability by type of health insurance coverage:

% Change in Enrollment and Gross Profits Per Member
graph
In reviewing enrollment for the major lines of health coverage, Weiss found that Medicaid
had the largest increase. Individual coverage rose by 502,000 new members during 2010. 
Federal Employees (FEHB) and Medicare also reported increases, enrolling 625,000 and
251,000 new members respectively, while group insurance enrollment fell by 3.3 million
members to 44.6 million enrollees.  Overall enrollment was static, rising just 0.4 million.

For more information on the Weiss study and for a complete list of Weiss Ratings’ strongest and weakest health insurers, visit www.weissratings.com/healthlists.

 

About Weiss Ratings, LLC

Weiss Ratings is the nation’s leading independent provider of financial strength ratings on U.S. banks, credit unions and insurance companies as well as sovereign debt ratings.  Weiss accepts no payment or other compensation for its ratings from rated institutions. WeissRatings.com is a destination site to help consumers and professionals make informed financial decisions.  It also distributes independent investment ratings on publicly traded companies, mutual funds, and ETFs.

 

For more information contact:

Maryellen Murphy
mmurphy@weissinc.com
(561) 818-8885

 


  1. Excludes California health insurers.
  2. Gross profits are premium income less medical expenses before subtracting administrative expenses and investment income.