Overall, health insurers in 2022 had a unique backdrop and were able to achieve solid growth while maintaining favorable operating performance. This has been reflected in strong equity performance in 2022 relative to the broader market, with a +2.2% index value for the largest publicly traded health insurers versus -14.6% for the S&P 500.[1]  Several factors have contributed to the performance across the health insurance industry, including continued membership growth (see chart below), as well as lower Medical Loss Ratio trends, with the large public health plans posting 70 bps of lower MLR to 85.3% due to lower utilization and reduced COVID-related treatment costs.[2]  

Chart 1. 

Industry Enrollment Statistics (in millions)












Original Medicare[4]





Medicare Advantage[4]





Medicaid & CHIP[4]










Chart 2.

View accessible version of this chart.

However, going forward we anticipate some increased headwinds for the industry, such as:

  • Increases to medical costs associated with utilization coupled with provider contract cost escalation
  • Membership growth impacts of Medicaid eligibility redeterminations, economic/recession risk and related employment trends
  • Regulatory and legislative pressures including increased Federal Trade Commission scrutiny on M&A combined with the new CMS Risk Adjustment Data Validation (RADV) ruling and its potential impact on Medicare Advantage margins over the long term

In spite of these industry challenges, we maintain a cautiously optimistic outlook for the health insurance sector given positive premium pricing trends, successful integration into provider and value-based care initiatives, and robust balance sheets of the larger health insurers.

The industry has experienced several years of strong membership enrollment, most notably in the Medicaid and Medicare Advantage business lines. In particular, Medicaid/CHIP enrollment has grown by 28.5% from pre-pandemic levels.[6] This growth was driven in part by the increase in several states’ expansion of its Medicaid programs, as well as by the suspension of Medicaid redeterminations of eligibility starting at the onset of the pandemic. As a result of the 2022 Omnibus spending bill, Medicaid redeterminations will commence again starting in April 2023, and it is estimated that up to 15 million people will lose Medicaid coverage as a result,[7] albeit the timing of the impact is expected to be spread out over 2023 and 2024 given the 12- to 14-month unwinding period. Furthermore, it is anticipated that approximately 70.6% of those who lose Medicaid coverage will gain coverage either through employer-sponsored plans or through the lower-margin individual marketplace,[8] thus driving membership growth for health plans serving those business lines. 

The individual marketplace enrollment growth will also be buoyed by the 2022 Inflation Reduction Act’s extension of enhanced subsidies and elimination of the “family glitch.” Insurers serving commercial and individual lines may also experience pressure on their medical loss ratios as 2023 progresses and those populations increase due to Medicaid disenrollment. For commercial lines, the expected membership gains from those disenrolled from Medicaid may be offset by a reduction in enrollment due to a potential recessionary environment and the related job losses. Conversely, health insurers offering Medicare Advantage plans are expected to see continued strong enrollment growth in 2023 as the population continues to age and favor MA plans. According to S&P, Medicare Advantage enrollment is expected to grow by 7%–8% in 2023,[9] providing a significant tailwind to overall membership growth. 

On January 30, more than 5 years since initially proposed, CMS issued its final ruling on RADV audits, which was enacted to recoup overpayments to Medicare Advantage organizations and disincentivizes plans from upcoding cases to higher-severity ailments that would generate elevated CMS reimbursement.[10] While Medicare Advantage plans benefited from a retroactive period going to 2018, versus to 2011 as originally proposed, the impact is nonetheless expected to be significant over time, particularly given the new methodology of extrapolating upcoding error rates from reviewed medical record samples and aggregating across the broader insured population, as well as dropping the Fee-for-Service (FFS) adjuster designed to adjust for actuarially equivalent payments made under traditional Medicare. CMS estimates recouping approximately $4.7 billion in payments through RADV audits from 2023 through 2032,[11] and while material clawbacks through these audits aren’t expected until 2025, the actual amount CMS ultimately recoups could exceed this estimate. The ruling also faces significant opposition from the industry, including the likelihood of legal challenges and in particular the decision by CMS to drop the FFS adjustments.

Regulatory considerations will continue to be a key driver of investments made by health plans in 2023 and beyond, as insurers seek to diversify revenue streams increasingly to non-regulated operations with lower costs and capital volatility. In 2022, several significant acquisitions were announced that further integrated healthcare services and value-based care initiatives with insurers. This included UnitedHealth’s expansion of its behavioral health and home health network through the acquisitions of Refresh Mental Health[12] and LHC,[13] as well as their acquisition of Change Healthcare[14] and its data analytic capabilities, technology services and revenue cycle management solutions. In 2022, CVS, the parent company of Aetna, also made a significant investment in value-based care with the announced $8 billion acquisition of Signify Health,[15] a home health and technology company that represents CVS’s first major acquisition in healthcare provider services. 

As payers continue to focus on additional opportunities to integrate into provider services, there will likely be increased competition from non-traditional healthcare disruptors that are also seeking to expand their access points with patients, such as Amazon’s announced acquisition of primary care company One Medical.[16] Case in point: After an unsuccessful attempt to acquire One Medical, in early February, CVS announced its agreement to purchase primary care services provider Oak Street Health for $10.6 billion.[17] If these notable recent transactions are any indication, 2023 may see robust healthcare M&A activity as the year progresses.

In summary, the entire healthcare industry faces mounting cost, regulatory and competitive pressures, but the health insurance segment is well positioned to continue the growth trend in 2023. While regulatory and macroeconomic conditions will likely impact certain key business lines disproportionately, health insurers are expected to achieve favorable overall membership growth and should continue to benefit from significant investments in value-based care and technology platforms.   

Accessible Version of Chart

Chart 2. 

(view chart

Dates Healthcare Payers - Index Value S&P 500 (^SPX) - Index Value Healthcare Payers - P/Normalized EPS S&P 500 (^SPX) - P/Normalized EPS
Jan-07-2022 -7.23% -2.49% 26.62x 33.14x
Feb-04-2022 -3.00% -6.17% 26.01x 30.37x
Mar-04-2022 0.28% -9.75% 26.04x 28.45x
Apr-01-2022 1.93% -5.23% 26.46x N/A
Apr-29-2022 0.47% -13.86% 25.74x 26.82x
May-27-2022 2.42% -13.31% 26.05x 26.63x
Jun-24-2022 -1.22% -18.45% 25.12x 25.12x
Jul-22-2022 2.37% -17.41% 25.64x 25.51x
Aug-19-2022 9.24% -11.84% 26.60x 26.78x
Sep-16-2022 4.73% -19.25% 25.50x 24.57x
Oct-14-2022 1.50% -25.30% 24.05x 23.36x
Nov-11-2022 5.09% -16.75% 24.68x 25.67x
Dec-09-2022 9.78% -17.98% 25.78x 25.28x