Financial Results

Humana Inc. on Aug. 2 said it expects to enroll approximately 825,000 members in its individual Medicare Advantage products this year, adding another 50,000 members to its initial projections and reflecting year-over-year growth of 18%. For the quarter ending June 30, the MA-focused insurer reported adjusted earnings per share (EPS) of $8.94, up from $8.76 in the second quarter of 2022, and a medical loss ratio (MLR) of 86.3%, up from 85.8% a year ago. The company raised its full-year 2023 adjusted EPS guidance to “at least $28.25,” reflecting a 25-cent increase. Humana also highlighted “stabilizing” MA utilization based on its most recent claims activity and said it continues to predict a full-year MLR of between 86.3% and 87.3%.

CVS Health Corp. on Aug. 2 reported second-quarter 2023 consolidated revenues of $88.9 billion, including $26.7 billion in revenue for the health care benefits segment, and reflecting overall growth of 10.3% from the year-ago quarter. Adjusted operating income for the health care segment declined by nearly 20% from a year ago, partly because of increased outpatient utilization in Medicare Advantage when compared with pandemic-driven utilization levels in the prior year, CVS Health explained in a detailed earnings release. For the quarter ending June 30, the company recorded an MLR of 86.2%, compared with 82.7% in the year-ago quarter, and adjusted EPS of $2.21, down from $2.53 in the second quarter of 2022. CVS Health confirmed its adjusted EPS guidance range of $8.50 to $8.70.

Government-focused publicly traded insurers reporting second-quarter 2023 earnings in July devoted a fair amount of discussion to the impact of Medicaid redeterminations on enrollment and rate adjustments, while analysts were interested in the recent trend of increased medical costs, particularly on the Medicare side. Despite these potential headwinds, the insurers appeared confident in their financial outlook for 2023, as all four raised their earnings projections for the full year.

After pausing eligibility verifications in exchange for receiving enhanced federal funding during the COVID-19 public health emergency (PHE), states were allowed to begin disenrolling people who longer qualify for Medicaid as of April 1. According to the latest update to AIS’s Directory of Health Plans, managed Medicaid enrollment as of June was nearly 73.4 million across 41 states, compared with 72.9 million a year ago — a decline that doesn’t yet fully reflect the impact of ongoing redeterminations. Nevertheless, some states have aggressively moved forward, prompting CMS to issue revised guidelines on best practices to avoid terminations driven by procedural reasons. Florida, for example, has already lost some 224,000 managed care enrollees (or close to 5%) from a year ago, according to DHP’s estimates.

The City of Cleveland on July 24 filed a lawsuit against PBMs and drug manufacturers, alleging they “orchestrated a pricing scheme that resulted in skyrocketing insulin prices and cost the city millions of dollars in prescription benefit payouts.” The companies named in the lawsuit include The Cigna Group’s Evernorth and its PBM/pharmacy subsidiaries Express Scripts, Medco Health Solutions and ESI Mail Pharmacy Services; CVS Health Corp. And its Caremark division; UnitedHealth Group and its Optum, Optum Rx and Optum Insight subsidiaries; as well as Eli Lilly & Co., Novo Nordisk Inc., and Sanofi-Aventis U.S. LLC. Cleveland is the first city to file such a suit; California filed a similar complaint in January, however, accusing largely the same companies of insulin price-fixing.

UnitedHealth Group saw higher-than-expected utilization in the second quarter, driven by seniors and those seeking behavioral health care. However, the company kept its full-year adjusted earnings per share (EPS) guidance intact, indicating that it expects that it can offset the higher costs associated with increased utilization.

For the quarter, UnitedHealth had a medical loss ratio (MLR) of 83.2%, up from 81.5% in last year’s second quarter and from 82.2% in this year’s first quarter. That was due primarily to an increase in the number of members who sought care during the quarter, particularly in seniors who had delayed outpatient orthopedic and cardiac surgeries during the coronavirus pandemic.

John Rex, UnitedHealth’s Chief Financial Officer, told analysts during a July 14 conference call that the company filed its 2024 Medicare Advantage offerings with the assumption the elevated level of seniors seeking care will persist into next year.

Elevance Health, Inc. reported positive second-quarter 2023 results, powered by solid commercial performance and promising returns from its Carelon health services division, which was launched last year.

The firm, which is the parent company of the Anthem and Wellpoint insurance brands, took in $43.4 billion of operating revenue in the quarter, up $4.9 billion or 12.7% year-over-year. Adjusted earnings per share (EPS) in the quarter were $9.04, beating the Wall Street consensus of $8.78 and representing a year-over-year increase of $1.07, or slightly more than 13%. The firm’s medical loss ratio (MLR) was 86.4%, down 70 basis points from the prior-year quarter — but it increased from the 85.8% figure.

An Elevance press release said the strong top-line revenue result was “primarily driven by premium rate increases in our Health Benefits business and higher premium revenue due to membership growth in Medicaid and Medicare. The increase in operating revenue was further attributable to growth in pharmacy product revenue within CarelonRx driven by growth in external pharmacy members served and the acquisition of BioPlus” — a specialty pharmacy firm — “in the first quarter of 2023.”

Only three Medicare Advantage insurers received a civil monetary penalty (CMP) as a result of a program audit last year, according to the 2022 Part C and Part D Program Audit and Enforcement Report published on July 18. CMPs based on 2022 program audit referrals totaled $63,220, and another $200,000 in fines stemmed from one-third financial audit findings. By contrast, the previous audit cycle resulted in approximately $1 million in CMPs issued based on 2021 referrals, and nearly half of that amount related to one-third financial audits. The latest audit cycle included 291 contracts under 25 separate parent organizations covering approximately 33.6 million, or 62%, of beneficiaries enrolled in the Parts C and D programs. CMS in the report said the amount of the CMP “does not automatically reflect the overall performance of a sponsor” and that the summary of findings is “not intended to reflect overall industry performance and should not be interpreted to mean that there are pervasive issues throughout the industry related to the noncompliance we identified.”

Executives from a health plan and hospital say that payer-provider alignment and value-based payment have existential stakes — if independent, regional-scale payers and providers can’t find a way to work together through joint ventures and new payment models, they say, national firms’ acquisitions of small payers and providers will accelerate.

That’s according to Greg Sweat, M.D., a senior vice president and chief health officer at Blue Cross and Blue Shield of Kansas City (Blue KC), and Stephen L. Reintjes, Sr., M.D., president and CEO of North Kanas City Hospital, who spoke during a June 13 session of the 2023 AHIP Conference in Portland, Oregon.

Here’s how major health insurers’ stock performed in June 2023. UnitedHealth Group had the highest closing stock price among major commercial insurers as of June 30, 2023, at $480.64. Humana Inc. had the highest closing stock price among major Medicare insurers at $447.13.

While strong premium revenue was one major reason for insurers’ favorable results in 2022, rising fee-based income from PBM and health care delivery assets has also played a major role in those firms’ rising fortunes. While that fact is largely viewed favorably by industry analysts, it’s also been increasingly criticized by lawmakers and other stakeholders concerned about vertical integration in the health care industry.

“From a ratings perspective, it’s good,” remarks Dean Ungar, a vice president and senior analyst at Moody’s Investors Service. “The diversified revenue stream is better than having a concentrated revenue stream. Of course, the caveat is, if you don’t execute well or if you make acquisitions that are not good acquisitions, you could end up with problems.”

After two months of shopping around its Medicare Advantage business, Bright Health Group, Inc. on June 30 unveiled plans to sell its remaining insurance assets to Molina Healthcare, Inc. in a deal worth approximately $600 million. The transaction will allow the “insurtech” to focus on its consumer care delivery business, which serves fee-for-service Medicare, Medicaid and Affordable Care Act marketplace customers, while enabling Molina to continue its strategic growth in the niche low-income MA space.

Bright in late April disclosed plans to divest its California MA business, Brand New Day and Central Health Plan, to qualify for an extension of an amended agreement with its creditors. (Bright previously exited the ACA exchange business in all 15 states where it operated.) Upon completion of the sale, which is subject to regulatory approval and other closing conditions, the proceeds will provide a significant boost to Bright’s capital position. The company explained in a June 30 press release that it “intends to use the proceeds to satisfy its obligations to its bank lenders with the remaining proceeds used towards liabilities in its discontinued ACA insurance business.” Additionally, it has extended a waiver and amendment to its credit facility.