As people in the United States continued to stay home and avoid non-emergency medical care in the second quarter, the country's private insurers reaped the benefits — with all major payer companies reporting year-over-year surges in profit.
It's quite the opposite of the tale for providers, which saw revenue slide without lucrative elective procedures. Hospitals have been largely kept afloat by federal relief funding, which has driven some for-profit operators to triple their net income in the second quarter.
Centene, Anthem and UnitedHealth all doubled profits or more in the quarter. CVS and Humana also raised their earnings outlooks for the year.
As a result, the Democrat leadership of the House Committee on Energy and Commerce launched an investigation Thursday into insurers' business practices, following reports of record profit margins. America's Health Insurance Plans pushed back against the committee in a statement Friday morning, saying "member companies are committed to providing real solutions to help Americans as COVID-19 continues to impact the lives of everyone."
As the insurers paid out fewer claims, their medical loss ratios tanked. UnitedHealth, Cigna and CVS saw MLR percentage point drops in the double digits, while companies more focused on managed care saw smaller dips.
The MLR reflects the amount the insurer spent on medical care versus what's left for administrative costs and, importantly, profits. Essentially, the Affordable Care Act sets profit limits on carriers. If an insurer fails to reach the minimum threshold for spending on care, it must send rebates to its members.
Based on the results so far this year, insurers could be on the hook for massive MLR rebate payouts. Anticipating that, some payers are refunding premiums. Anthem, for example, provided a premium credit of 10% to 15% for its members.
Payer executives said medical usage was starting to tick up at the end of the second quarter, but as surges of COVID-19 continue in the South and West, it's unclear to what extent the rosy numbers may continue for the companies.