According to a KFF analysis released today, it turns out the answer is Medicare Advantage plans. Although the reason why Medicare Advantage is more profitable may not be obvious:
At the end of 2024, gross margins per enrollee ranged from $608 in the Medicaid managed care market to $1,655 in the Medicare Advantage market. Gross margin per enrollee in the group market was $846, about half the average level for Medicare Advantage plans. Gross margin per enrollee in the individual market in 2024 was $987. Margin levels reflect, in part, overall health needs and spending in the market area. The same margin in percentage terms will translate into a higher margin in dollars per enrollee when average health spending is higher.
In fact, the Medicare Advantage medical loss ratio (i.e., the percentage of premium income that insurers pay out as medical claims) was much higher for Medicare Advantage (90%) than for the individual (85%) and group markets (88%), but slightly lower than for Medicaid managed care (91%).
Perhaps surprisingly, health insurance gross margins remain relatively flat – or even decline – between 2018 and 2024.
You can read the full analysis Here.
