Contract Awards

The CEOs of CVS Health Corp. and The Cigna Group on Sept. 12 downplayed the potential for PBM market disruption that could result from Blue Shield of California’s recent deal to unbundle its pharmacy benefit contracts. But both executives hedged by emphasizing their PBMs’ flexibility, and Cigna’s boss suggested that its Express Scripts subsidiary has an a la carte PBM menu.

CVS and Cigna leaders also said, during presentations at the Morgan Stanley Health Care Conference, that they are confident that their Medicare Advantage Star Ratings will improve, and they promised further MA growth. Both firms assured investors that their recent, multibillion-dollar provider transactions will lead to future growth. And both firms, which own two of the “Big Three” PBMs, said that biosimilars will be a boon to payers — with CVS promising as much as 80% savings on its forthcoming Humira (adalimumab) biosimilar line.

The $2.5 billion deal between Elevance Health, Inc. and Blue Cross and Blue Shield of Louisiana is facing some hiccups, per the New Orleans Times-Picayune. The Louisiana Blues affiliate must reissue ballots to 92,000 policyholders that will allow them to approve or reject the sale and invalidate proxy ballots that it’s already received. The insurer will also reschedule a meeting and official vote until after the state’s Dept. of Insurance has held a two-day hearing on the proposed sale. Louisiana Insurance Commissioner Jim Donelon and Attorney General and gubernatorial frontrunner Jeff Landry — both Republicans — have been critical of the deal, the Times-Picayune reported. The newspaper also said that attorneys in the state Dept. of Insurance “fully expect litigation” over the proposed transaction, which Elevance announced in January.

The City of New York and its retirees this month are experiencing déjà vu, and CVS Health Corp.’s Aetna is caught in the middle. The health insurer was slated to begin serving retired municipal workers and their eligible dependents on Sept. 1 via a Medicare Advantage PPO plan. But thanks to the latest court order in a years-long series of setbacks, the city’s plan to privatize retiree health coverage again is on hold.

Led by Mayor Eric Adams (D), the city was initially supposed to transition some 250,000 retirees and dependents to a private Medicare plan administered by Elevance Health, Inc., in January 2022. The move was delayed by a petition from retirees, and state Supreme Court Judge Lyle Frank ruled that the proposal violated city law by charging retirees $191 per month to maintain their fee-for-service Medicare coverage. Amid the legal challenges, NYC Comptroller Brad Lander declined to register the contract. After Elevance backed out of the deal, the city struck an agreement with Aetna to make its PPO plan the only premium-free coverage option.

For the second time in recent history, New York City Comptroller Brad Lander is refusing to register the city’s contract with a Medicare Advantage insurer. But this time it’s not just legal challenges that has the comptroller questioning the city’s move away from fee-for-service (FFS) Medicare, but the broader trends in the MA industry. And CVS Health Corp.’s Aetna is ready to defend its positioning as an experienced provider of retiree health benefits.

After multiple delays, the city was planning to transition some 250,000 retirees and their eligible dependents on Sept. 1 to a PPO plan administered by Aetna. The contract is valued at $15 billion over the first five-plus years of the agreement.

After learning of a disturbing interaction between a Papa Inc. employee and a Medicare Advantage member, Capital District Physicians’ Health Plan (CDPHP) last year stopped all in-person visits from the supplemental benefits vendor and launched an investigation into Papa’s security protocols. The incident, which involved a Papa worker making lewd comments while visiting a homebound member, and CDPHP’s ongoing investigation was detailed in a Bloomberg article on May 30. After learning of the incident in early 2022, the New York-based insurer banned the “pal,” but eventually paused all future visits. Since then, it has been closely monitoring all customer service interactions to ensure the safety and wellbeing of members, a spokesperson tells AIS Health, a division of MMIT. CVS Health Corp.’s Aetna and Humana Inc. — two other insurers that have partnered with Papa — declined to comment when contacted by AIS Health.

After much delay, the City of New York appears to be moving forward with a plan to transition its retiree health care coverage to a group Medicare Advantage plan, having recently chosen CVS Health Corp.’s Aetna to administer a PPO plan starting Sept. 1. The contract is valued at $15 billion over the first five years and four months of the term agreement.

The city’s plan to transition some 250,000 retirees and their eligible dependents away from fee-for-service (FFS) Medicare coverage was initially supposed to begin on April 1, 2022, and be managed by Elevance Health, Inc. (in partnership with EmblemHealth). Retirees petitioned to block the move, and state Supreme Court Judge Lyle Frank in March 2022 ruled that the proposal violated city law by requiring retirees who opted out of the switch to pay $191 per month to maintain their FFS coverage. That July, Elevance backed out of the deal.

Although it’s been more than 10 years since antitrust litigation was first filed against Blue Cross Blue Shield plans, an objection to a settlement reached with one group of plaintiffs has delayed the conclusion of a case that carries significant implications for the health insurance industry. Legal and health policy experts say it could be another year or more before the litigation is finalized — but in the meantime, they suggest that the settlement’s rewriting of Blues plan rules is already sparking consolidation in the market.

In the circa-2012 litigation, a group of health insurance subscribers (health plans and employers) and a cohort of health care providers allege that certain long-held Blues plan practices violate federal and state antitrust laws. Those practices include allocating geographic markets through license agreements and limiting the percentage of non-Blue revenue each plan can earn, among others. Although the subscriber class and the defendants reached a tentative settlement in 2020, and an Alabama district court judge approved it in 2022, a small group of employers including the Home Depot filed appeals last fall that effectively put the settlement on hold.

Centene Corp. had a tough fourth quarter in 2022, with the insurer posting a $282 million loss for the period. The company’s executives attributed the rough ride to high administrative costs and lower-than-expected enrollment in Medicare Advantage. However, the firm posted solid results over the whole of 2022. Wall Street seems wary of Centene’s prospects over the next year, with analysts identifying notable challenges during 2023.

Centene took in $35.6 billion in revenue in the fourth quarter, up 9% year-over-year from 2021; total revenues in 2022 were $144.54 billion, up 15% from 2021. Net earnings for 2022 were $1.2 billion, or $2.07 in diluted earnings per share (EPS). The firm posted a loss of $0.38 per share during the fourth quarter of 2022. Medical loss ratio (MLR) was 87.7% in 2022, down from 87.8% in 2021. However, full-year earnings were dampened by selling, general and administrative expenses (SG&A), which increased from 7.9% in 2021 to 8.4% on an adjusted basis.

The U.S. Dept. of Defense recently awarded $136 billion in contracts for its TRICARE program that provides health care benefits to military service members, retirees and their families. The contract award for the West region went to TriWest Healthcare Alliance of Phoenix, which is partnering with Regence health plans and Health Care Service Corp. to administer the program. Humana Government Business Inc. will continue to serve the East region when the next contracts begin in 2024. Currently, Health Net Federal Services LLC, a subsidiary of Centene Corp., covers the West region with about 2.8 million beneficiaries, and Humana covers the East region with more than 6.8 million enrollees. In 2024, six states in the East region — Arkansas, Illinois, Louisiana, Oklahoma, Texas and Wisconsin, with a total of 1.5 million beneficiaries — will transfer to the West region in order to balance out the number of beneficiaries served by the two regions.

Reporting financial results for the quarter and year ending Dec. 31, 2022, UnitedHealth Group on Jan. 13 said full-year revenues grew 13% year over year to $324.2 billion, and earnings from operations rose 19% to $28.4 billion. The company ended the year with an 82.0% medical loss ratio, which was consistent with projections provided at its annual Investor Day. The UnitedHealthcare segment reported full-year revenues of $249.7 billion, up 12% from the prior year, and operating earnings of $14.4 billion, up 20% from 2021. Those results were largely driven by growth in the number of people served, including an additional 615,000 in Medicare Advantage; overall MA enrollment exceeded 7.1 million at the end of 2022. UnitedHealth also reported adjusted earnings per share of $22.19 for full-year 2022 and maintained guidance of adjusted EPS between $24.40 and $24.90 for 2023.