Most large health insurers posted stronger-than-expected earnings in the second quarter, but much of the improvement might not be durable, according to a Moody’s Ratings analysis published Aug. 24.
Average EBITDA margins across the seven largest publicly traded insurers rose to 4.7% in Q2, up from 3.9% in the same period a year earlier. UnitedHealth Group posted the largest swing, expanding to 6.2% from 3.7%, while Centene jumped to 3.7% from 0.6% on the back of marketplace margin recovery and outperformance in its Medicare Advantage and prescription drug plan businesses. Five of the six insurers that reported results raised or affirmed full-year guidance.
The rating agency cited high-cost specialty drugs, sustained behavioral health demand and aggressive provider billing and coding as ongoing pressures. The report also described a “clear industry pivot toward margin stabilization rather than top-line growth,” calling the shift broadly credit positive.
Several insurers have framed 2026 as the trough year for Medicaid margins, signaling that the gap between rates and cost trends is beginning to stabilize. In Medicare Advantage, finalized 2026 reimbursement rates remain below cost trend, but disciplined repricing and benefit reductions are driving visible margin improvement.
Moody’s warned that a significant portion of the quarter’s gains came from favorable prior-year reserves and non-recurring items rather than underlying financial improvement. Aetna alone attributed roughly $500 million, or 140 basis points of medical loss ratio improvement, to favorable prior-year development.
“The more significant test of whether pricing actions, benefit design changes, and reimbursement adjustments are sufficient to durably offset elevated medical cost trends will come in the second half of 2026, when deductibles are largely exhausted and utilization typically accelerates,” analysts wrote. “Persistently elevated costs continue to constrain margin recovery through year-end.”
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