Financial Results

News Briefs: California fines Anthem

The Supreme Court ruled that HHS incorrectly altered the 340B drug program, with Justice Brett Kavanaugh finding that “absent a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rates only for 340B hospitals; HHS’ 2018 and 2019 reimbursement rates for 340B hospitals were therefore unlawful.” Kavanaugh’s opinion found in favor of the American Hospital Association, which brought a suit against HHS over the changes. “When the original [changes] went into effect in 2018, CMS cut Medicare 340B reimbursements by ~30% for most outpatient drugs, leading to ~$1.6B in savings for the first year,” wrote Citi analyst Jason Cassorla in a note to investors. HHS may have to make retroactive payments to hospitals to make up for the savings, Cassorla noted.

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Latest Audit Report Highlights Enforcement Activity Outside Program Audits

In CMS’s latest audit report, the agency confirms what an earlier AIS Health analysis of compliance notices indicated: the agency imposed approximately $1 million in civil money penalties (CMPs) based on 2021 referrals, and nearly half of that stemmed from one-third financial audit findings. CMS, meanwhile, cautioned the industry not to read too much into the latest audit results as they relate to 2020, when CMS audited a relatively small number of plans due to the COVID-19 public health emergency (PHE).

In the 2021 Part C and Part D Program Audit and Enforcement Report, published on June 7, CMS said it imposed 16 CMPs amounting to $1,043,953, or an average of $65,247 per CMP. Sponsors audited in 2021 covered 26% of enrollment.

Insurers’ Venture Capital Firms Pay With Influence Over Vendors

Launching a venture-capital (VC) fund has become commonplace for many health insurers, even smaller ones, industry insiders tell AIS Health. They typically do not disclose returns — and many of these funds are so new that there haven’t been enough exits to judge performance. But the investments pay dividends for insurers in the ability to influence the strategic direction of their vendors, get preferred contracting terms — and hopefully still make some money.

There are a lot of reasons that insurers launch VC funds, says Ari Gottlieb, a principal at consulting firm A2 Strategy Group. “They don’t have the pure profit motive that a traditional venture fund has, which is just making sound investments,” he says. “They’re not designed, though, to lose money.”

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Marketplace MLR Rebates Likely to Drop After Record Highs

Health insurers will likely issue about $1 billion in medical loss ratio (MLR) rebates this year, according to data from the Kaiser Family Foundation (KFF) and Mark Farrah Associates. That amount is a drop from both 2020 and 2021, which set the all-time highs for MLR rebates disbursed since the Affordable Care Act came into effect. Experts tell AIS Health, a division of MMIT, that the dropoff in rebates is related to pandemic utilization and a more stable policy environment for the individual marketplace.

Health plans selling insurance on the individual, small group and fully insured large group markets are required to return any premium revenue that is not spent on care (or care quality improvements) to members.

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MCO Stock Performance, May 2022

Here’s how major health insurers’ stock performed in May 2022. Anthem, Inc. had the highest closing stock price among major commercial insurers as of May 31, 2022, at $509.61. Molina Healthcare, Inc. had the highest closing stock price among major Medicaid insurers at $290.22.

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Key Financial Data for Leading Health Plans — First Quarter 2022

Here’s how major U.S. health insurers performed financially in the first quarter of 2022. Health Plan Weekly subscribers can access more health plan financial data — including year-over-year comparisons of leading health plans’ net income, premium revenue, medical loss ratios and net margins. Just email support@aishealth.com to request spreadsheets for current and past quarters.

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Clover Health Hires New CFO as Firm Aims to Improve Efficiencies, Lower Costs

Medicare Advantage-focused startup Clover Health, which continues to expand its footprint and gain enrollees despite questions about its profitability, will soon have a new chief financial officer. According to a May 25 press release, Scott Leffler will join Clover in August after serving as CFO and treasurer of Sotera Health, where he oversaw the company’s global finance, procurement and IT organizations.

Leffler’s hiring follows several key additions to the company’s management team this year. During the first quarter, Clover Health appointed Conrad Wai as chief technology officer and Joseph Martin as general counsel. And in May, the company hired Aric Sharp as CEO of value-based care. The news of Leffler’s appointment comes after Clover Health spent more than 10 months seeking a replacement for Joe Wagner, who left the company in August 2021 for personal reasons.

Startups Oscar Health, Bright Health Exit Markets & Tighten Belts

Startup insurers Oscar Health, Inc. and Bright Health Group, Inc. have decided they will no longer sell individual and/or family plans in certain states after this year. Ari Gottlieb, a principal at consulting firm A2 Strategy Group, tells AIS Health that those are signs the companies are looking to stem large losses and shore up their businesses as their stock prices fall and raising additional capital becomes harder.

Gottlieb says he anticipates Cigna Corp, which invested in Oscar earlier this year, could buy the company as soon as the end of the year. The fate of Bright remains unknown, although Gottlieb does not see Oscar, Bright or the two other publicly traded startup insurers (Alignment Healthcare and Clover Health Investments Corp.) becoming profitable anytime soon. Gottleib says Cigna may buy Bright also.

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Humana Doubles Down on Primary Care Clinic Investments

Humana Inc. has become the latest insurer to increase its investment in building de novo primary care clinics, perhaps finding that while building is more effective than buying, opening clinics on a broad scale is a costlier proposition than first thought.

The insurer on May 16 said it had established a second joint venture with Welsh, Carson, Anderson & Stowe (WCAS) to further expand its value-based, senior-focused primary care clinics. (Hg Capital Partners and WCAS share control of MMIT, the parent of AIS Health.) The deal will provide up to $1.2 billion of additional capital for the development of approximately 100 new payer-agnostic clinics operated by Humana subsidiary CenterWell between 2023 and 2025. The expansion follows an earlier agreement that is currently deploying up to $800 million of capital to open 67 clinics by early 2023 and support ongoing operations, Humana added. WCAS will have majority ownership of the joint venture, while Humana will have a minority stake.

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Cigna Eases Investor Fears With Better Medical Cost, Membership

Cigna Corp. pleased Wall Street with its first-quarter 2022 financial results, touting a solid increase in commercial self-funded membership and a better-than-projected medical loss ratio (MLR) of 81.5%.

The insurer posted first-quarter 2022 net income of $1.18 billion ($3.68 per share) on revenue of $44.0 billion, up from net income of $1.16 billion ($3.30 per share) on revenue of $40.1 billion for the same period in 2021.

Cigna’s self-funded commercial membership rose 9% to 12.5 million through March 31, while insured commercial membership rose 2% to 2.2 million. In all, Cigna had 17.8 million medical members on March 31, 2022, up about 700,000 or 4% from Dec. 31, 2021, when it stood at 16.7 million.

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