It turns out the answer is Medicare Advantage plans according to a KFF analysis released today. However 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 margins per enrollee in the group market was $846, roughly half the level observed among Medicare Advantage plans on average. Per enrollee gross margins in the individual market in 2024 amounted to $987. The level of margins reflects, in part, the overall health needs and spending in a market segment. A similar margin in percentage terms will translate to a higher margin in dollars per enrollee when average health expenses are higher.
In fact, Medicare Advantage medical loss ratios (i.e., the percent of premium income that insurers pay out in the form of medical claims) was much higher for Medicare Advantage (90%) than the individual (85%) and group market (88%), but slightly lower than Medicaid Managed Care (91%).
Perhaps surprisingly, health insurance gross margins have remained relatively flat–or even declined–between 2018 and 2024.
You can read the full analysis here.
