Best’s Market Segment Report

AM Best Holds Its Stable Outlook on U.S. Health Insurance Industry

Improved earnings, favorable regulation fuels optimism

December 06, 2021 — OLDWICK, N.J.–(BUSINESS WIRE)–AM Best is maintaining a stable market segment outlook on the U.S. health insurance industry for 2022, citing the segment’s improved earnings, a favorable federal regulatory environment and expansion of Affordable Care Act (ACA) subsidies.

In its new Best’s Market Segment Report, “Market Segment Outlook: U.S. Health,” AM Best states that favorable earnings in the segment have continued in 2021, albeit with some moderation after several years of strong earnings that peaked in 2020. Utilization for medical services reverted to a more-normal level in 2021, but still lagged historical levels in non-COVID-related complex cases, pediatrics, inpatient care and emergency room services. The strong earnings in recent years have translated into material capital growth and a strengthening of risk-adjusted capitalization across the health insurance industry.

Biden Administration Showing Support For ACA

The Biden administration has shown backing for measures that support the ACA and Medicaid, including the American Rescue Plan Act of 2021, which expands federal subsidies for ACA products through 2022 and makes the cost of an individual ACA policy more affordable for many. Overall enrollment has benefited from the increased ACA subsidies, as well as from favorable federal policies on Medicaid enrollment redeterminations. Given the administration’s desire to expand access to insurance coverage, AM Best believes that federal regulatory actions that would pressure revenue and earnings are unlikely in the near term.

At the same time, the proportion of membership, revenues and income derived from government business, which is a lower margin business, continues to grow and now represents a larger portion of health insurers’ operations. Combined with limited overall growth in the commercial segment, this creates a pressure point for operating margins due to the change in business mix.

Favorable earnings are expected for 2022, but so is margin compression, as utilization is expected to increase closer to pre-pandemic levels with the potential for increased morbidity. Provider reimbursement rates also will be upwardly pressured. AM Best expects the health insurance segment to continue to respond in a timely and appropriate way to operating environment challenges and for results to remain favorable.

• To access the full copy of this market segment report, please visit here.

• To view a video with AM Best Managing Director Ken Frino about the U.S. health market segment outlook, please visit here.



Leading AM Best analysts will review 2022 market segment outlooks for the U.S. insurance industry’s major segments and the global reinsurance industry in an online briefing scheduled for Thursday, Dec. 9, 2021 at 2:00 pm EST. To register for the briefing, please go to
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