Financial Results

Here’s how major health insurers’ stock performed in February 2023. UnitedHealth Group had the highest closing stock price among major commercial insurers as of February 28, 2023, at $475.94. Humana Inc. had the highest closing stock price among major Medicare insurers at $495.02.

Three publicly traded startup insurers all posted losses for the full year 2022, and one firm — Bright Health Group, Inc. — may be on its last legs. A managed care insider tells AIS Health, a division of MMIT, that while Oscar Health, Inc. may have righted the ship and Clover Health Investments Corp. didn't perform as poorly as expected, Bright is in bad shape.

Bright took in revenue of $551.4 million and posted a net loss of $188.2 million, or negative earnings before interest, taxes, depreciation and amortization (EBITDA) of $108.5 million over 2022, with a medical loss ratio (MLR) of 93.9%. Oscar took in revenue of $3.96 billion against operating expenses of $4.55 billion, posting a net loss of more than $609 million during 2022, with an 85.3% MLR. Clover took in $3.4 billion and reported $298.7 million in negative EBITDA during 2022, with MLR at 91.8%.

Government-funded health plans have become highly profitable for the country’s largest insurers as Medicaid rolls have swelled and as more and more seniors choose Medicare Advantage plans. Yet analysts say changes are coming that may partially even the playing field between smaller health plans and industry heavyweights, which command the bulk of government business.
A new report from the insurance-focused credit rating firm A.M. Best — titled “US Health Insurers Prepare for Shift Driven by End of Government Mandates” — stated that health plans overall “have reported good top-line growth over the last two years, with premium revenues up 8.2% in 2021 and 10.9% through the third quarter of 2022.”

Medicaid eligibility redeterminations will restart in just a few weeks, on April 1, but few beneficiaries know that they could lose health insurance benefits in the coming months, according to a new poll from the Urban Institute and Robert Wood Johnson Foundation (RWJF). Although some plans are taking proactive steps to manage eligibility checks, experts tell AIS Health, a division of MMIT, that many aren’t, despite the potential for significant losses of revenue for Medicaid managed care organizations (MCOs).

The Urban Institute-RWJF poll found that in December, 64.3% of adults had “heard nothing at all about the return to [the] regular Medicaid renewal process.” Rates of awareness of eligibility redeterminations varied little by region, with all regions reporting a lack of awareness between 61.3% and 67.6%. Differences were also marginal across expansion and non-expansion states.

By the end of 2021, gross margins per enrollee in the Medicare Advantage market had returned to pre-pandemic levels, and were significantly higher than gross margins in other health insurance markets, according to a recent Kaiser Family Foundation analysis. In 2021, gross margins for MA plans averaged $1,730 per enrollee, more than double the margins in the individual market ($745), the fully insured group ($689) and the Medicaid managed care market ($768). Gross margins for the individual market and group markets were 36% and 17% lower, respectively, in 2021 than they were in 2019, whereas the gross margins per enrollee for Medicaid managed care plans were higher in 2021 than pre-pandemic.

Humana Inc. will exit the commercial insurance business and focus exclusively on government books of business, the company said on Feb. 23. Industry analysts say it was a wise strategic move, and experts tell AIS Health, a division of MMIT, that the decision will have a marginal impact on Humana’s profits.

Humana said that “following a strategic review,” it has decided to shelve its Employer Group Commercial Medical Products (FEHB) business — which includes all fully insured, self-funded and Federal Employee Health Benefit plans — over the next 18 to 24 months. A press release said the division “was no longer positioned to sustainably meet the needs of commercial members over the long term or support the company’s long-term strategic plans.” The streamlining move comes on the heels of Humana’s divestment of its hospice business during 2022; the firm also executed a “value creation plan” that executives say delivered $1 billion in additional earnings.

During their recent fourth-quarter and full-year 2022 earnings calls, the companies that own the country’s largest PBMs all said they expect that part of their business to gain momentum this year thanks to successful selling seasons in which their increasingly diversified offerings resonated with clients.

In 2022, “Optum Rx revenues grew 9%, approaching $100 billion for the year, driven by continued strong sales and the expansion of our pharmacy services businesses,” UnitedHealth Group Executive Vice President and Chief Financial Officer John Rex said during the company’s Jan. 13 conference call to discuss financial results. “Both customer retention and new customer wins were among the highest Optum Rx has ever delivered, laying a strong foundation for continued market-leading growth,” he added.

CMS on Feb. 14 said the HHS Secretary has chosen three new models for testing by the CMS Innovation Center to help lower prescription drug costs, promote accessibility to life-changing drug therapies, and improve quality of care. The three models address the themes outlined in President Joe Biden’s executive order on lowering drug costs and meet the selection criteria thresholds of affordability, accessibility and feasibility of implementation, according to a Feb. 14 press release. First, the Medicare High-Value Drug List Model will encourage Part D plans to offer a low, fixed copayment across all cost-sharing phases of the Part D benefit for a standardized Medicare list of generic drugs that treat chronic conditions. Patients’ out-of-pocket costs for these generic drugs will be capped at a maximum of $2 per month per drug. Under the second model, the Cell and Gene Therapy Access Model, state Medicaid agencies will assign CMS to coordinate and administer multi-state, outcomes-based agreements with manufacturers for certain cell and gene therapies. Finally, under the Accelerating Clinical Evidence Model, CMS will develop payment methods for drugs approved under accelerated approval, in consultation with the Food and Drug Administration, to encourage timely confirmatory trial completion and improve access to post-market safety and efficacy data. This would reduce Medicare spending on drugs that have no confirmed clinical benefit, CMS stated.

Confirming a tie-up that had been rumored for months, CVS Health Corp. on Feb. 8 revealed that it struck a $10.6 billion deal to buy Oak Street Health, which owns primary care centers catering to Medicare-eligible patients. Executives of the two firms say the benefits of the proposed transaction abound for both CVS Health and Oak Street, but industry observers say the acquiring firm still faces a bevy of risks as it seeks to incorporate multiple new care delivery assets.

During CVS Health’s conference call to discuss fourth-quarter and full-year 2022 financial results, CEO Karen Lynch and Mike Pykosz, Oak Street’s president, discussed the merits of the deal at length.

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.