Medicare Advantage, individual markets did well financially in 2023

Medicare Advantage and individual health insurance marketplace plans achieved the best results on certain financial performance indicators in 2023, according to a KFF brief.

The researchers leveraged the Health Coverage Portal from Mark Farrah Associates to assess payer financial data. The brief addressed four markets: Medicare Advantage, the group market, the individual market, and Medicaid managed care.

They excluded California health maintenance organizations. Also, the data for five states were missing or nonexistent. Plans that did not fit certain criteria demographics were not included. 

The two financial performance indicators that the researchers analyzed were gross margins, where Medicare Advantage plans performed well, and medical loss ratios (MLR), where individual health insurance marketplace plans rose to the top. While these two measures are not enough to comprehensively assess a market's financial status, they can provide some insight into financial performance.

Medicare Advantage plans had an average gross margin per enrollee of $1,982 in 2023. This means Medicare Advantage plans gained almost $2,000 per enrollee in premium income beyond the market population’s claim costs. The 2023 results for Medicare Advantage plans were on par with their 2022 average gross margins but were far ahead of the 2023 runner-up, the individual market ($1,048 per enrollee).

These Medicare Advantage gross margins may be surprising after plans warned of higher utilization rates in the final months of 2023. Payers were especially vocal after the release of the 2025 Medicare Advantage and Part D Final Rate Notice. However, they are less surprising when placed in historical context: since 2014, Medicare Advantage plans have always had the highest gross margins across all four markets.

The group market is making a comeback after hitting the lowest gross margins in the past 10 years, almost attaining 2018 levels in 2023. The individual market also has improved its gross margins in the wake of high premiums in 2018 due to the potential repeal of the Affordable Care Act.

Meanwhile, Medicaid managed care rates are still recovering from the coronavirus pandemic. After Medicaid agencies began redeterminations, leaders projected that the remaining enrollee population would be sicker. If they were correct, it might explain--at least in part—why the plans only saw $753 in gross margins per enrollee in 2023.

MLRs did not vary as much across markets as gross margins did in 2023. The results hovered between 84% and 87%. The individual health insurance market achieved the lowest MLR, meaning that it had the lowest share of premium income going toward claims out of all four markets.

The individual market’s 2023 MLR remains higher than its pre-pandemic MLRs. The 2023 MLR for the group market also exceeded 2018 and 2019 levels. However, in Medicaid managed care, the 2023 MLR was below the market’s pre-pandemic levels.

Meanwhile, in Medicare Advantage, the 2023 MLR was still higher than either the pre-pandemic or pandemic timeframes. These results could point to multiple factors.

“It may be difficult to interpret changes in MLRs with increasing consolidation, driven in part by insurers purchasing related businesses, such as pharmacy benefit managers, physician groups, and post-acute care providers, because it is not entirely clear how insurers allocate expenses across different lines of business,” the researchers explained.