Financial Results

Humana Anticipates Strong EPS Growth in 2023, Cites Individual MA Enrollment Increase

During its fourth-quarter and full-year 2022 earnings call on Feb. 1, Humana Inc. said that it will have strong adjusted earnings per share (EPS) growth and see a significant increase in its individual Medicare Advantage (MA) enrollment this year.

Humana projects its adjusted EPS in 2023 will be at least $28, which “is slightly favorable to prior statements” and is 10.9% higher than its $25.24 adjusted EPS for 2022, Jefferies analyst David Windley wrote in a note to clients on Feb. 1.

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News Briefs: CMS Projects Average Rate Increase of 1.03% for MA Plans in 2024

CMS in its 2024 Advance Notice projected that Medicare Advantage organizations can expect an average estimated change in revenue of 1.03%, when taking into account an average increase in risk scores of 3.3%. Even though analysts expected that rate to fall well below the robust 8% CMS predicted in its preliminary rate notice for 2023, they characterized it as low when excluding the risk scoring trend. The 2024 projection is also based on an effective growth rate of 2.09%, which CMS this time last year estimated would be 4.75%. Additionally, CMS will continue to apply the statutory minimum coding intensity adjustment of 5.9% to offset the effects of higher levels of coding intensity in MA relative to fee-for-service (FFS) Medicare. That coding intensity adjustment generated much discussion in comment letters on the Advance Notice last year. When asked during a Feb. 1 call with reporters why CMS again opted for the minimum adjustment, CMS Deputy Administrator and Center for Medicare Director Meena Seshamani, M.D., Ph.D., told AIS Health: “We continue to analyze and evaluate MA coding patterns, and 5.9% we feel is adequate at this time, and we continue to look at coding pattern differences, how we set that pattern adjustment [and] how that’s applied…in future years as well.” The preliminary rate notice also included technical updates to the risk adjustment model, including a reliance on condition categories from the ICD-10 classification system (instead of the ICD-9 system) and a shift to more recent underlying FFS data years to reflect 2018 diagnoses and 2019 expenditures.

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Elevance Sees Double-Digit Percentage EPS Growth for Fifth Consecutive Year

Elevance Health, Inc. on Jan. 25 reported adjusted earnings per share (EPS) of $29.07 in 2022, representing a 12% increase from 2021. Gail Boudreaux, the company’s president and CEO, told analysts on a conference call that it was the fifth consecutive year in which Elevance’s adjusted EPS had hit or exceeded its 12% to 15% annual target increase. That came as the insurer, which was known as Anthem, Inc. until last year, ended the year with more than 47.5 million medical members, up nearly 2.2 million from the end of 2021.

David Windley, a Jefferies analyst, wrote in a note to investors on Jan. 25 that Elevance’s fourth quarter “was solid (maybe not exceptional),” citing the company’s 89.4% medical loss ratio (MLR) and adjusted EPS of $5.23, which beat the Wall Street consensus estimate of 90.1% and $5.19, respectively. Windley noted that Elevance “still has a long way to go” with improving its full-year 5.4% operating margin, although he noted the 3.4% fourth-quarter operating margin was a 10 basis-point improvement from the fourth quarter of 2021.

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Talk of Flu Season, OptumInsight Colors UnitedHealth 4Q Earnings Call

During the company’s recent conference call to discuss fourth-quarter and full-year 2022 financial results, UnitedHealth Group executives touched on subjects ranging from the historically bad flu season to the future of the company’s data analytics division. All in all, equities analysts declared the health care giant to be on strong footing as 2023 gets underway — a positive sign, they say, for a managed care sector that tends to follow where UnitedHealth leads.

“Within MCOs, there is little fundamental concern,” Jefferies analysts advised investors on Jan. 17, with each MCO’s earnings per share (EPS) likely to see a compound annual growth rate of about 12% through 2024. And while UnitedHealth shares are priced at a “nearly unprecedented 35% premium” relative to its peers, the analysts suggested that the diversified firm’s OptumInsight and OptumHealth divisions “make a case for the widening spread.”

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Executive Compensation Data for Presidents and/or CEOs of Blue Cross and Blue Shield Affiliates, 2021

See a full list of director compensation for Presidents and/or CEOs of Blue Cross and Blue Shield Affiliates at https://bit.ly/3GPOdyK, compiled by AIS Health.

N/A = Not Available.

Compensation data for Jared Short includes payments allocated to Regence insurance operations in Washington state, Oregon and Utah but not Idaho.

SOURCE/METHODOLOGY: All data is compiled from individual health insurance companies, state insurance department documents and U.S. Securities and Exchange Commission filings.

Health plans selected based on commercial medical risk enrollment as of the beginning of 2022, per AIS’s Directory of Health Plans.

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News Briefs: UnitedHealth’s 4Q Earnings Beat Street Estimate

UnitedHealth Group kicked off the managed care sector’s latest round of financial results on Jan. 13 by reporting fourth-quarter and full-year 2022 adjusted earnings per share (EPS) of $5.34 and $22.19, respectively. The company’s adjusted EPS for the prior quarter beat the Wall Street consensus estimate of $5.17, and its medical loss ratio of 82.8% was just a hair higher (worse) than the consensus projection of 82.7%. The firm also reported that its full-year revenues of $324.2 billion grew 13% compared to 2021, “with double-digit growth at both Optum and UnitedHealthcare.”

Nearly 15.9 million people have signed up for Affordable Care Act exchange coverage since the start of open enrollment on Nov. 1, CMS reported on Jan. 11. “This record-breaking enrollment represents a 13% increase over last year, including over 3 million people new to the Marketplaces,” the agency said in a press release. As in prior enrollment snapshots, the 15.9 million enrollment figure includes signup data from both the federal and state-based marketplaces. In the 33 states using the HealthCare.gov platform, there were 11.9 million plan selections through Jan. 7, 2023, while the 18 state-based exchanges reported 4 million plan selections through Dec. 31, 2022. Americans in most states have until Jan. 15 to sign up for marketplace coverage for 2023, unless they qualify for a special enrollment period.

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2023 Outlook: With High Debt Loads, More Providers Will Be Purchased by Insurers

Health care transactions, particularly in the provider space, appear poised for another banner year, even as inflation, rising interest rates and a possible recession slow mergers & acquisitions (M&A) across the rest of the economy. Some providers are in financial crisis and seem sure to consolidate with each other or be taken over by private equity entities, while health insurers seem poised to spend pandemic-related windfalls.

Generally, health insurers are in good financial health. The health insurance business is somewhat protected from inflation, as carriers can pass through rising prices to commercial plan sponsors. Meanwhile, risk in government books of business is ultimately borne by the public. In addition, many carriers have plenty of cash on hand, meaning they are also insulated from rising interest rates. In spring 2020, when COVID-19 hospitalizations hit their first nationwide peak and local governments shuttered many businesses and in some cases barred nonessential medical procedures, health care utilization cratered. Utilization did not approach normal levels until the end of that year, and so premium revenues far outstripped claims paid for most insurers.

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Startup Insurer CEOs Talk Profitability Goals at J.P. Morgan Conference

During the J.P. Morgan Healthcare Conference on Jan. 11, chief executives of Bright Health Group, Inc., Clover Health Investments Corp. and Oscar Health, Inc. discussed their companies’ aims to achieve profitability this year or next year. Thus far, however, the companies have not had a profitable quarter since they went public in 2021.

For the first three quarters of 2022, the companies collectively had a net loss of more than $1.3 billion: Bright Health lost $691.3 million, Clover Health lost $254.8 million and Oscar Health lost $383 million.

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2023 Outlook: Analysts Predict Another ‘Stable’ Year for Health Insurers

This year, a variety of headwinds and tailwinds are likely to buffet the health insurance industry, including inflation, a possible recession, the return of Medicaid eligibility checks, potential policy changes in Medicare Advantage, a split Congress, easing COVID costs and more. But the net effect of all those factors is likely to leave the sector on stable footing, analysts tell AIS Health.

“The tailwinds and headwinds change every year — that’s the case again for ’23. Overall, we think it’s balanced; that’s why we have a stable view,” says James Sung, associate director of insurance at S&P Global Ratings.

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MCO Stock Performance, December 2022

Here’s how major health insurers’ stock performed in December 2022. UnitedHealth Group had the highest closing stock price among major commercial insurers as of December 30, 2022, at $530.18. Humana Inc. had the highest closing stock price among major Medicare insurers at $512.19.

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