US Health Insurers' Earnings Showed COVID-19 Pandemic's Impact

While the US health insurance industry experienced positive results in 2021, its total underwriting gain of $23.9 billion was a 65 percent decline from 2020's level, according to A.M. Best.

The Best's Special Report "Second Year of COVID Drives Health Insurers' Earnings Down, But Impact Differs by Segment," notes that COVID-19-related costs dampened the health insurance industry's results. Pandemic-related expenses, including treatment, testing, and vaccinations, led to claims costs that were significantly higher than projected across the industry, the rating agency said.

Because of the mandate for insurers to cover COVID-19 testing, insurers had limited flexibility to direct members to lower-cost testing locations, Best said. Meanwhile, non-COVID healthcare utilization, which dropped sharply in 2020 for elective procedures and office visits, bounced back from the lows of 2020, though remained below historical levels.

Commercial lines health insurance business saw the largest decrease in underwriting gains, dropping approximately 90 percent to $1.2 billion, Best said.

The impact of the two COVID-19 variant waves experienced in 2021 was reflected in the US health insurance industry's quarterly results during the year, according to Best. The industry posted underwriting gains of $12.7 billion in the first quarter, though those gains declined in subsequent quarters, turning into a $3.8 billion underwriting loss in the year's fourth quarter.

Best said the US health insurance industry remains well capitalized despite the impact of the pandemic.