Financial Results

Still intent on standing apart from established Medicare Advantage competitors with their use of technology, Medicare-focused “insurtechs” Alignment Healthcare, Inc. and Clover Health Investments Corp. recently reported first-quarter 2023 earnings that showed shrinking losses and increasing insurance revenue. While both insurers are focused on retaining and/or growing their MA membership, fellow startup Bright Health Group, Inc. will soon shed its MA business — its last insurance asset — to continue growing its noninsurance segment focused on value-based care (VBC) delivery.

Declaring a “strong start to the year,” Alignment Healthcare, Inc. on May 4 posted first-quarter revenue of $439.2 million, reflecting year-over-year growth of 27.1%. That was aided largely by a nearly 21% jump in health plan premium revenue to $399.7 million as MA membership climbed 16% to 109,700 lives, the company reported.

Not one, not two, but three insurtechs that have gone public in recent years reported their first-quarter earnings on May 9 — and each took the opportunity to detail how they’re stepping away from unprofitable parts of their businesses and focusing on ventures that can help put them in the black.

“Oscar is in a very different place than we were a year ago,” newly minted CEO Mark Bertolini said during Oscar Health Inc.’s earnings call.

“A year ago, we were focused on absorbing our increased scale and ensuring that our operations could handle a sizable increase in growth,” continued Bertolini, the former Aetna CEO who left the company after its acquisition by CVS Health Corp. “Today, we are focused on advancing the capabilities and technology to best serve our members and have been able to shift our attention to implementing a series of initiatives aimed at improving the efficiency of our operations.”

Here’s how major health insurers’ stock performed in April 2023. UnitedHealth Group had the highest closing stock price among major commercial insurers as of April 28, 2023, at $492.09. Humana Inc. had the highest closing stock price among major Medicare insurers at $530.49.

Although executives during The Cigna Group’s first-quarter 2023 earnings call put a heavy emphasis on the firm’s evolving PBM business model, Cigna’s ability to control health care costs was a noteworthy —albeit less headline-grabbing — highlight that caught one equities analyst’s eye.

Cigna delivered “the best MLR beat of the bunch,” Jefferies analyst David Windley wrote in a May 8 research note, pointing out that the insurer’s medical loss ratio of 81.3% beat the Wall Street consensus estimate by 60 basis points. For the full year 2023, Cigna expects its MLR to be in the range of 81.5% to 82.3%.

During their first-quarter earnings calls in recent weeks, top executives at the companies that own the three largest PBMs in the U.S. discussed the regulatory challenges and inquiries facing the industry. They also defended the PBMs’ business practices, claiming they play a major role in negotiating drug prices on behalf of their clients. And they noted they have retained nearly all of their customers and added new ones despite the increased industry scrutiny.

Elected officials have targeted CVS Health Corp.-owned Caremark, The Cigna Group’s Express Scripts and UnitedHealth Group’s Optum Rx, accusing them of contributing to the high price of medications and for their lack of transparency. Those three PBMs have about an 80% market share, a consolidation of power that has garnered criticism from state and federal policymakers.

Due to the early close of its deal to purchase Oak Street Health, CVS Health Corp. when reporting first-quarter 2023 results said it would lower its full-year earnings per share (EPS) estimate from a range of $8.70 to $8.90 down to $8.50 to $8.70. Yet that short-term headwind is a small price to pay for the long-term benefits of the transaction combined with another recently closed deal to buy Signify Health, CEO Karen Lynch said during the company’s May 3 earnings call.

“These acquisitions significantly advance our value-based strategy by adding primary care, home-based care, and provider enablement capabilities to our platform,” she said. Moreover, “the combination of Signify, Oak Street and CVS Health creates a value-based, person-centered care platform propelled by the powerful connections between our unique capabilities and assets. This will enable us to drive better patient experience and health outcomes while delivering on our long-term financial goals.”

Integrated insurer-provider Kaiser Permanente (KP) will acquire Geisinger Health, the Pennsylvania-based integrated health system and health insurance plan, as part of a new Kaiser venture that will aim to take over other regional nonprofit hospital systems. That new venture, Risant Health, will be an independent division of Kaiser and seek to orient its subsidiary hospital systems toward payer-agnostic, value-based reimbursement. Experts tell AIS Health, a division of MMIT, that the deal accelerates and intensifies the ongoing trend of multistate, cross-market hospital system consolidation.

According to Kaiser spokesperson Stephen Shivinsky, Geisinger is the inaugural member of Risant Health, “a new nonprofit organization created by Kaiser Foundation Hospitals to expand and accelerate the adoption of value-based care in diverse, multi-payer, multi-provider community health system environments….Risant Health will operate separately and distinctly from Kaiser Permanente’s core integrated care and coverage model while building upon Kaiser Permanente’s 80 years of expertise in value-based care.”

Recent weeks have brought both good and bad news for insurtechs, with Bright Health Group, Inc. appointing a new chief financial officer, putting its last health insurance asset up for sale, and disclosing that it’s being sued by a provider group for unpaid claims. Clover Health Investments Corp., meanwhile, revealed that it will outsource its core insurance operations to a technology vendor, cut 10% of its workforce, and settle one of a series of shareholder lawsuits filed against the company.

Industry observers tell AIS Health, a division of MMIT, that the net effect of those developments isn’t yet clear, but one thing is certain: The Bright and Clover sagas are far from over.

Kaiser Permanente unveiled plans to acquire Geisinger Health and make it the first member of a new value-based nonprofit health organization called Risant Health, if the deal gains regulatory approval.

Kaiser Permanente’s health insurance products cover more than 11 million people in eight states and the District of Columbia, according to AIS’s Directory of Health Plans. Combined, Kaiser’s seven regional managed care plans form the largest provider-sponsored insurer, enrolling 28.1% of all provider-sponsored lives. It is the largest insurer in the commercial risk market, with over 9 million members. It also ranks as the fifth-largest Medicare Advantage health plan in the nation.

As the industry prepares for a comprehensive overhaul of the model used to determine Medicare Advantage insurers’ risk-adjusted pay, the three largest MA organizations signaled during recent earnings calls that they are well positioned for the changes.

Reporting first-quarter 2023 financial results on May 3, CVS Health Corp. beat Wall Street expectations of $2.09 per share with adjusted earnings per share (EPS) of $2.20, largely driven by better-than-expected membership in the health care benefits segment despite a year-over-year increase in medical loss ratio. Total revenues increased 11% from the first quarter of 2022 to reach $85.2 billion, fueled by growth across all segments, while the health care benefits segment (Aetna) generated revenues of $25.9 billion, up from $23.1 billion a year ago. Medical membership grew sequentially by 1.1 million members to a total of 25.5 million lives as of March 31, reflecting increases across all product lines including growth of 900,000 enrollees in the Affordable Care Act exchange business.