Health insurers are gearing up to release their first-quarter results over the next several weeks, and a new analysis from Fitch Ratings finds that ongoing concern about utilization in Medicare Advantage (MA) has made for a cloudy outlook.
The analysts wrote in the insurance dashboard report that payers with a significant presence in the MA space faced elevated medical loss ratios last year amid a spike in care utilization. Others, meanwhile, saw their MLRs decline last year, according to the report.
"The significant increase in 4Q23 senior market utilization reported by some companies creates significant uncertainty around profitability for the sector in 2024," the analysts wrote.
Despite the uncertainty, analysts at Fitch said earlier this year that the spike in utilization would likely be credit-neutral for the industry. In the dashboard report, the authors note that operating earnings before interest, taxes, depreciation and amortization was about 6.8% last year across the seven largest publicly traded insurers.
That's a slight decrease from 7% in 2022, according to the report. These seven payers account for about 70% of membership in the U.S., according to the report.
"The stable operating results reflect continued focus on premium rate adequacy among insurers in light of increased operating costs incurred within the provider community in recent years," the analysts wrote.
The analysis noted that payers issued fairly little incremental debt last year, which follows a trend in declining financial leverage.
The report also touches on the potential impacts of the massive and far-reaching cyberattack on Change Healthcare, which will no doubt be a major topic of conversation across first-quarter calls. The report said that while UnitedHealth Group, Change's parent company, will no doubt feel the financial effects, other payers are less likely to be significantly burdened.
"Companies may experience modest uncertainties in reserving in 1H24 given the disruption in claims information," the researchers said.