Financial Results

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.

Friday Health Plans Management Services Company, Inc. is in the death throes of its life as an Affordable Care Act exchange insurer — regulators are stepping in to take over its operations, and it’s laying off all employees in its home state of Colorado. Meanwhile, Bright Health Group, Inc., which has already exited every ACA exchange in which it operated, reached a deal to sell its California Medicare Advantage plans to Molina Healthcare, Inc. in order to satisfy Bright’s creditors.

Experts tell AIS Health, a division of MMIT, that both insurers largely followed the same playbook: raising massive amounts of funding from venture capital (VC) investors and promising to delight customers with tech-driven, differentiated products. But those big plans fell apart when faced with the realities of an industry that is especially challenging to disrupt, and then capital infusions dried up when interest rates rose.

Private equity (PE) ownership of physician practices and other providers has, on a national scale, led to higher prices in health care, experts said during a June 6 panel convened by the National Institute for Health Care Management (NIHCM) Foundation. One expert also added that health insurers are poised to benefit from the PE ownership trend in health care delivery, as insurers frequently snap up providers when PE entities “exit” their takeover of providers.

In his presentation, Atul Gupta, Ph.D., assistant professor of health care management at the University of Pennsylvania’s Wharton School of Business, made the case that “private equity [ownership of providers] has dramatically increased over the last few years.”

Here’s how major U.S. health insurers performed financially in the first quarter of 2023. 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.

North Carolina and Colorado recently became the latest in a string of states that have taken over the reins of Friday Health Plans Management Services Company, Inc.’s subsidiaries in a bid to ensure consumers and providers aren’t harmed by the insurer’s implosion. The company’s downfall has implications for health insurers, too, as they may not receive the risk-adjustment funds they’re expecting if Friday can’t pay its share, an industry expert previously told AIS Health.

Insurance Commissioner Mike Causey said June 20 that Friday Health Plans of North Carolina Inc. “consented to being placed into receivership to protect North Carolina policyholders due to its reported insolvency and inability to raise additional funds from outside investors.” Technically, the action is not yet completed, as the state said it filed its receivership petition with the Wake County Superior Court and will post the order on the North Carolina Dept. of Insurance's website once it is signed.

Not long after UnitedHealth Group sparked an insurer-stock selloff by revealing that it is seeing higher-than-usual outpatient care utilization, Humana Inc. disclosed that it, too, is seeing elevated medical costs due to an increased use of services.

“At this point it appears that there may be a new trend brewing with a rise in utilization and claims, particularly in the Medicare Advantage segment,” A.M. Best Senior Director Sally Rosen remarked in a new video released by the insurance-focused credit rating firm.

And that’s significant for the managed care industry writ large, Rosen tells AIS Health, a division of MMIT. “Medicare Advantage comprised more than one-third of the industry’s underwriting income in 2022, and while the dollar amount has fluctuated, the percentage of underwriting income coming from Medicare Advantage has made up about one third for each of the past three years,” she says.

UnitedHealth Group’s stock took a nosedive on June 13 after Chief Financial Officer John Rex said elevated outpatient care utilization might push the insurer’s 2023 medical loss ratio (MLR) higher than it originally expected. Since UnitedHealth is the bellwether of the managed care sector, other insurers’ stock traded down in the wake of Rex’s comments. However, equities analysts suggested that the highly diversified UnitedHealth isn’t in any danger of taking a major earnings hit.

During the Goldman Sachs Global Healthcare Conference, Rex said UnitedHealth has seen higher levels of outpatient care activity since the first quarter of 2023, and looking at data from the second quarter, the trend doesn’t appear to be going away. He cited hip and knee replacements as well as cardiovascular care — all “very localized in [the] Medicare business” — as the areas where UnitedHealth is seeing higher utilization.