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Member, Beacon International Group, Ltd.
Rating agency A.M. Best Co. Inc. said Monday that its outlook on health insurers remains “negative” despite their improvement in overall net income for 2010.
Insurers’ 2010 earnings are expected to beat 2009 because of higher investment income, better underwriting results due to a milder-than-expected flu season, and a decline in medical utilization as a result of the economic downturn, Best said in a briefing.
But the Oldwick, N.J.-based rating agency also said it expects health insurer profit margins to fall this year as a result of several factors, foremost of which are changes in pricing and benefits that are required to meet new minimum medical loss ratio requirements set by the federal health care reform law.
Health insurers must meet a minimum MLR of 80% for individual and small-group business and 85% on large-group business. The ratio will be calculated on a state-by-state basis, and health insurers will be required to give rebates to policyholders if they fail to meet the minimums.
Health insurer margins also may be squeezed by an expected return to normal utilization levels as the economy recovers, Best predicted.
“There also is some concern that utilization also could increase beyond what is considered normal because individuals may have been postponing necessary treatment” during the economic downturn, Best said in the briefing.