Employer Group Health Plans

During UnitedHealth Group’s annual Investor Day, analysts focused largely on looming challenges for the firm’s Medicare Advantage business. Yet the company’s executives also revealed some intriguing details about new benefit designs gaining traction in the company’s commercial insurance book of business.

In reviewing the updated 2024 financial estimates that UnitedHealth released before its Nov. 29 Investor Day, Wells Fargo analyst Stephen Baxter advised investors that “we see higher-than-expected MLR [medical loss ratio] and more modest MA membership growth as items to pick at.”

The Cigna Group is reportedly discussing a multibillion-dollar deal with Humana Inc. that would create a diversified health insurance giant capable of going toe-to-toe with UnitedHealth Group and CVS Health Corp.

Industry observers agree that such a transaction would receive robust regulatory scrutiny — with many predicting a high likelihood that federal officials will lob a legal challenge. However, opinions vary about how much the companies’ respective PBM businesses present a major antitrust risk.

News of the potential deal came from a Nov. 29 Wall Street Journal article, which cited people familiar with the matter speaking on condition of anonymity. Assuming the talks don’t fall apart, the terms of the deal could be finalized by the end of the year, the article stated.

The Centers for Medicare and Medicaid Services wants clarification from the federal court that recently ruled against the agency’s interpretation of the law when it comes to commercial insurance plans’ use of copay accumulators before it revises its current policy on such programs.

The Health and Human Services Department filed a motion with the U.S. District Court for the District of Columbia on Nov. 27 seeking an explanation for the court’s late September decision that the policy, which allows plans to use copay accumulators broadly, must be set aside and remanded back to CMS because of the agency’s contradictory reading of the same statutory and regulatory language.

Three quarters into 2023, Moody’s Investors Service says the predictions it made at the start of the year for the health insurance sector — namely, earnings growth in the mid-to-high single digits — have largely proven accurate. However, while financial results were consistent with the credit rating firm’s expectations, analysts said in a new report that the reasons for those results were not exactly what they predicted.

“Our outlook was premised on reduced membership as a result of Medicaid redeterminations and the impact of a possible recession on commercial membership,” the analysts wrote in a report released on Nov. 20. “However, with no recession this year, commercial membership has been better than expected, but its growth has been offset by higher-than-expected MA [Medicare Advantage] utilization.” Additionally, “although Medicaid redeterminations are underway, their impact so far has been relatively small.”

Depending on whom you ask, a new “cost-plus pharmacy pricing” option from The Cigna Group’s Express Scripts is either a half-hearted attempt to compete with true market innovation or an offering that simplicity-seeking PBM clients are likely to embrace. However, industry experts agree on one thing: The model was clearly inspired by Mark Cuban Cost Plus Drug Co.

“I’m not surprised to hear that Express Scripts is rolling this out. The Mark Cuban company set the pathway for this to happen; their business is growing pretty quickly,” says Marc Guieb, Pharm.D., a consulting pharmacist at Milliman. He notes that Blue Shield of California in August awarded a contract to Cost Plus Drugs to manage retail pharmacy pricing and payment for the insurer’s members, as part of an “unbundling” of Blue Shield’s current PBM contract with CVS Health Corp.

The Cigna Group could be fielding offers for its Medicare Advantage book, according to a Nov. 6 Reuters report. Experts say that a spinoff is plausible given the small size of Cigna’s MA book and Cigna’s heavy focus on commercial insurance — and Wall Street analysts say the move could be a first step toward a megamerger with a government-focused insurer.

Wells Fargo and RBC analysts say that the move could be an effort to preempt the intense antitrust scrutiny Cigna might face if it sought to merge with a government insurance-focused firm such as Humana Inc. or Centene Corp., because Cigna would have only commercial and Affordable Care Act marketplace books after an MA spinoff.

The Cigna Group could be fielding offers for its Medicare Advantage book, according to a Nov. 6 Reuters report. Experts say that a spinoff is plausible given the small size of Cigna’s MA book and Cigna’s heavy focus on commercial insurance — and Wall Street analysts say the move could be a first step towards a megamerger with a government-focused insurer.

Wells Fargo and RBC analysts say that the move could be an effort to preempt the intense antitrust scrutiny Cigna might face if it sought to merge with a government insurance-focused firm such as Humana Inc. or Centene Corp., because Cigna would have only commercial and Affordable Care Act marketplace books after an MA spinoff.

A recent survey from WTW found 38% of employer-sponsored health plans provide coverage for anti-obesity medications, while another 22% are planning on or considering covering those drugs in 2024 or 2025. Meanwhile, about two-thirds of employers that are members of WTW’s Rx Collaborative cover anti-obesity drugs, according to Cody Midlam, a director in the company’s Pharmacy Community group.

Midlam tells AIS Health, a division of MMIT, that “we’re definitely seeing the trend is leaning towards adding coverage” of the medications, which are expected to be costly for plans in the coming years. Morgan Stanley, for instance, projected in a September report that the global market for weight management medications could reach $77 billion in 2030, up from just $2.4 billion last year.

Two recent surveys from KFF and WTW indicate employer-sponsored health plans are concerned with rising health care costs, driven by factors such as inflation, increased utilization and rising prescription drug expenditures. However, the results suggest that employers are becoming more hesitant to raise health insurance costs for workers at a higher rate than their salary increases.

While the average annual family premiums for employer-sponsored coverage increased 7% this year to $23,968 after not increasing a year ago, according to the KFF Employer Health Benefits Survey, workers’ average wages increased 5.2% and inflation was up by 5.8%. During the past five years, premiums increased 22%, while wages rose by 27% and inflation increased 21%.

The average annual premium for employer-sponsored health insurance in 2023 was $8,435 for single coverage and $23,968 for family coverage, a 7% increase from 2022, according to the Kaiser Family Foundation 2023 Employer Health Benefits Survey. On average, premiums for single and family coverage grew 22% since 2018. Over the past 10 years, the growth seen in the average premium for family coverage outpaced the rate of inflation (47% vs. 30%), whereas the average family premium and average wages grew at comparable rates (47% vs. 42%).