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Moody's: Insurers' EBITDA Growth for 2021 Falls Short of Expectations

Analysis  |  By Jay Asser  
   February 25, 2022

Payers surveyed in Moody's earnings quarterly report managed 2.6% EBITDA growth in 2021, a drop-off from both estimates and figures in recent years.

Insurers experienced minimal growth in 2021 due in large part to the Delta and Omicron COVID-19 variants, according to new analysis from Moody's Investors Service.

Among the surveyed group of publicly traded payers, [[{"fid":"12154","view_mode":"default","fields":{"format":"default"},"link_text":"the earnings quarterly report","type":"media","field_deltas":{"1":{"format":"default"}},"attributes":{"class":"file-default media-element","data-delta":"1"}}]] found the EBITDA growth for this past year to be 2.6%—below the expected range of mid-to-upper single digits and short of the growth in recent years.

Though the individual market saw 2.8 million people sign up after the Biden administration implemented a special enrollment period for The Affordable Care Act (ACA) from February 15 to August 15 and passed increased subsidies, the flip side for insurers was adverse selection.

"But in a throwback to the early days of the ACA, it also led to significant adverse selection, which caused performance to decline," the analysts said. "The insurers have responded with pricing actions and product redesign, which could lead to lower enrollment but better performance."

Growth in Medicare Advantage (MA) counterbalanced some of the negative effects related to the ACA, as enrollment increased to 14% for the payers surveyed. Medicaid also benefited from the suspension of eligibility redeterminations until the expiration of the public health emergency, rising 14.3% in enrollment.

Aetna suffered the biggest drop-off of the insurers analyzed, as their EBITDA of $5.3 billion for 2021 was 17.5% lower than the previous year. Aside from Cigna, which also experienced a decrease of 1.9%, Anthem (8.7%), Centene (2.8%), Humana (1.2%), Molina (15.5%), and UnitedHealth (7.0%) all saw an increase in EBITDA to varying degrees.

After navigating the challenges of 2021, payers are expected to benefit from the shifting landscape as "growth will likely accelerate to the low double digits" for 2022, according to the report. As COVID costs lower and the individual market performs better, insurers should receive a bump.

"For 2022, earnings growth is likely to pick up, based on improved performance in the individual market, better commercial enrollment trends in line with projected economic growth, and continued growth in [MA], offset by declining Medicaid enrollment once eligibility redeterminations resume, which is likely to happen midway through the year," the analysts said.

Jay Asser is the contributing editor for strategy at HealthLeaders. 

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