Insurer medical loss ratios are high

February 19, 2025

Sources: StatNews February 10 and Yahoo Finance (CVS, February 12)

Self-insured employers are feeling the pain of multiple years of high medical trends. Insurers are hurting, too. Most of the major health insurance carriers have been reporting high medical loss ratios (MLR). This metric, sometimes called “medical benefit ratio” is the portion of fully insured premiums that health insurance plans spend paying providers for medical services.

Axios reported that Moody’s and Standard & Poors each downgraded their outlook on the health insurance sector from stable to negative, citing rising medical costs. The National Association of Insurance Commissioners reported that average health plan margin in mid-2024 was 2.7%, compared to 5.3% in 2020. That’s not an especially good comparison, as medical claims were low in 2020 due to suppressed elective care during the height of the pandemic.

Implications for employers:

• Health plan actuaries underestimated the demand for medical services so far this year, which likely indicates that fully insured premiums will rise steeply next year.

• Pressures on hospitals are increasing this year, and hospitals are likely to continue to seek high rate increases.

• Carriers may also be more reluctant to make concessions on self-insured administrative fees given that they have fallen short on margin in their fully insured businesses.

Tomorrow: Heart health worsening in the U.S.