As if UnitedHealth Group didn’t have enough on its plate to recover from losing its head of hair … [+]
As UnitedHealth Group grapples with the horrific loss of the health insurance industry’s head, the company faces rising costs and tough negotiations with the governments it works with to deliver health benefits to older and poor Americans.
In the wake of the shooting death of UnitedHealthcare CEO Brian Thompson, a focus emerged on health insurance denial of medical care and certain other business practices trolls on social media and industry critics including some in Congress who wants to see reforms. However, reforms, if they happen at all, are unlikely to come into effect in 2025.
But in the near term, UnitedHealth’s UnitedHealthcare business, along with industry rivals including Centene, Humana, Elevance Health and CVS Health’s Aetna health insurance unit, face challenges in their government-funded operations, including Medicaid coverage for poor Americans and Medicare Advantage benefits for Americans 65 and older. .
Take a report from Fitch Ratings on Friday, who said prices charged by states hiring health insurers to administer Medicaid benefits “will continue to challenge America’s health insurers.”
“Pressure on Medicaid margins could persist into the first half of 25, but rate-setting discussions with states should ultimately include a higher level of discernment,” Fitch analysts said about the first half of 2025. “Recent commentary from health insurers with exposure to the Medicaid market has highlighted concerns about the inadequate rates paid to them per Medicaid beneficiary relative to average healthcare costs, resulting in margin pressure on a product that is already relatively generates small margins.”
The price pressure from state Medicaid programs seeking to keep costs under control comes as health insurers have already seen higher costs as Americans receive more care now that the Covid-19 pandemic has passed. This trend has been seen in both Medicaid and Medicare Advantage, Fitch said.
The seven largest publicly traded health insurers are expected to have an annual medical care ratio (MCR), the percentage of premium revenue that goes to medical costs, of nearly 86% by 2024, according to Fitch. UnitedHealthcare’s medical care ratio was 85.2% for the third quarter of this year, compared to 82.3% last year,” UnitedHealth said. reported for UnitedHealthcare in October.
For most of the past decade, this rate has been between 82% and 84% for the top health insurers, according to Fitch data.
“Weaker combined operating performance for the seven largest publicly traded health insurers (year-over-year) through (the first nine months of 2024) primarily reflected continued increases in healthcare service utilization among seniors and higher acuity in the remaining Medicaid population upon completion of the redetermination process,” Fitch said.
Still, companies like UnitedHealth Group, Humana and CVS Health have large and growing businesses that also provide medical care, which could somewhat blunt the impact of rising costs in their health insurance businesses.
“Increasing medical claims ratios in 2024 were modestly offset by lower administrative ratios and stronger investment income as higher market interest rates continue to permeate insurers’ generally high-quality, short-term bond portfolios.” Fitch said. “Business diversification at some health insurers across insurance products, provider assets and pharmacy benefit management also continues to mitigate the impact of increased healthcare utilization.”