Financial Results

The Federal Trade Commission, Dept. of Justice and HHS on March 5 released a request for information (RFI) on private equity (PE) and “other corporations’” — including payers’ — ownership of health care providers, citing concerns over patient and worker safety, consolidation, and escalating costs. In a public event held that day, the agencies presented a deeply negative view of providers currently owned by PE and tipped further enforcement actions — including a heightened emphasis on legal coordination with state antitrust regulators.

The investigation is just the latest in a series of ambitious health care antitrust moves by the Biden administration. The FTC has also launched investigations into PBMs, while the DOJ tried to block notable transactions like UnitedHealth Group’s acquisition of Change Healthcare — and in October launched a broad antitrust investigation into UnitedHealth itself, which became public in recent days. The text of the new RFI said it “complements” CMS’s recent, separate RFI on Medicare Advantage.

Speaking at two health care investment conferences on March 5, executives at three major health insurance companies noted that they had been affected by the ongoing cyberattack on Change Healthcare, the nation’s leading processor of medical claims. However, they noted that it is still too early to assess how the Change attack will affect their first-quarter results.

The companies — CVS Health Corp., Elevance Health, Inc. and Humana Inc. — each reaffirmed their financial guidance for the year while addressing investors. They admitted, though, that they do not have as much information on claims and utilization as usual due to the Change outage that was discovered on Feb. 21.

Here’s how major health insurers’ stock performed in February 2024. Elevance Health, Inc. had the highest closing stock price among major commercial insurers as of Feb. 29, 2024, at $501.25. Humana Inc. had the highest closing stock price among major Medicare insurers at $350.32.

Since the Supreme Court overturned Roe v. Wade last year, 8% of large firms offering health insurance to their employees reduced or expanded their coverage for abortion. That’s according to an analysis of KFF’s Employer Health Benefits Survey, which found that 3% of firms whose largest plan does not cover abortion or covers it under limited circumstances reduced or eliminated coverage for abortion. Meanwhile, 12% of firms whose largest plan covers abortion in most or all circumstances added or expanded abortion coverage. KFF defined large employers as those with at least 200 workers.

U.S. health insurance companies’ capitalization levels are expected to increase this year but at a lower rate than last year, according to an AM Best report released on Feb. 29. The credit rating firm noted that the growth should slow because many insurers are seeing less profitability in their Medicare Advantage and managed Medicaid books of businesses. The report found the growth in net premiums written by health insurers increased 10% in 2022 and 7.6% through the first three quarters of last year.

Although Blue Cross Blue Shield plans’ margins started rising again in 2023 after a two-year slump, industry analysts say that a diverse array of factors could prevent continued margin expansion among the Blues this year.

“We don’t question that Blues overall will probably remain profitable…but the improvement in the margins in ’23 probably is not going to reoccur [this year],” says Bridget Maehr, director at the insurance-focused credit rating firm AM Best. “We’re probably going to see a little bit more of a normalization of margins.”

According to a new analysis from Mark Farrah Associates, Blues’ aggregate profit margin — net income divided by total revenues — swelled to 6.1% in the third quarter of 2020. During that time, the uptick in COVID-19-related care was far outpaced by declines in routine care, causing coffers to fatten across the insurance industry. Blues’ aggregate margin then declined to 3.9% by the third quarter of 2021, and it fell further to 3.0% in the third quarter of 2022.

CEOs of health insurance companies have received increasing pay packages over the past few years, AIS Health’s Executive Compensation Database shows. The database includes major health insurers’ executive compensation from 2019 to 2022 — collected from individual companies, state insurance documents and U.S. Securities and Exchange Commission filings — and their national membership information as of the third quarter of 2023, per AIS’s Directory of Health Plans. The database will be updated annually.

Several states do not disclose compensation data for specific executives at health insurance companies or do not collect compensation data. Some insurance companies made leadership changes over the years.

In the latest round of health insurer executive compensation data collected by AIS Health, there were once again intriguing stories to tell — such as why an insurtech CEO appeared to outearn the heads of the industry’s largest insurers, or what led a Blue Cross Blue Shield affiliate to nearly double its CEO’s compensation year over year.

However, finance experts who spoke to AIS Health, a division of MMIT, say that the biggest story might just be a recent court decision involving none other than Tesla, Inc. CEO Elon Musk, as the ruling could influence how all types of companies — including health insurers — determine their chief executives’ compensation going forward.

As the second batch of publicly traded insurers posted fourth-quarter and full-year 2023 financial results, continued utilization pressures in Medicare Advantage remained a prominent theme during earnings calls held in the first two weeks of February. Such pressures prompted Humana Inc. to slash its outlook for 2024, but this month only CVS Health Corp.’s Aetna lowered its adjusted earnings per share (EPS) guidance, while The Cigna Group — which is planning to sell its relatively small MA business — raised its outlook.

CVS Health Corp. on Feb. 7 reported fourth-quarter adjusted EPS of $2.12 and full-year adjusted EPS of $8.74. Consolidated revenue grew 11.9% year over year to $93.8 billion, while revenue for the Health Care Benefits segment, which includes Aetna’s MA business, increased 16% to nearly $27 billion. CVS Health said it added 1.3 million members in 2023, which reflected growth across multiple product lines.

CVS Health Corp. on Feb. 7 lowered its earnings per share (EPS) guidance for 2024, citing high Medicare Advantage cost trends. Wall Street analysts expected the announcement because other insurers, such as UnitedHealth Group and Humana Inc., previously mentioned MA costs as a potential drag on their profits. Meanwhile, The Cigna Group, reporting its fourth-quarter and full-year 2023 results on Feb. 2., increased its EPS guidance for this year and received favorable views from analysts.

CVS projects an adjusted EPS of at least $8.30 this year, down from its previous guidance of at least $8.50 that the company disclosed during its investor day on Dec. 5. The company had an adjusted EPS of $8.74 in 2023.

Here’s how major health insurers’ stock performed in January 2024. UnitedHealth Group had the highest closing stock price among major commercial insurers as of Jan. 31, 2024, at $511.74. Humana Inc. had the highest closing stock price among major Medicare insurers at $378.06.