Stock Performance

The Cigna Group is reportedly discussing a multibillion-dollar deal with Humana Inc. that would create a diversified health insurance giant capable of going toe-to-toe with UnitedHealth Group and CVS Health Corp.

Industry observers agree that such a transaction would receive robust regulatory scrutiny — with many predicting a high likelihood that federal officials will lob a legal challenge. However, opinions vary about how much the companies’ respective PBM businesses present a major antitrust risk.

News of the potential deal came from a Nov. 29 Wall Street Journal article, which cited people familiar with the matter speaking on condition of anonymity. Assuming the talks don’t fall apart, the terms of the deal could be finalized by the end of the year, the article stated.

Three quarters into 2023, Moody’s Investors Service says the predictions it made at the start of the year for the health insurance sector — namely, earnings growth in the mid-to-high single digits — have largely proven accurate. However, while financial results were consistent with the credit rating firm’s expectations, analysts said in a new report that the reasons for those results were not exactly what they predicted.

“Our outlook was premised on reduced membership as a result of Medicaid redeterminations and the impact of a possible recession on commercial membership,” the analysts wrote in a report released on Nov. 20. “However, with no recession this year, commercial membership has been better than expected, but its growth has been offset by higher-than-expected MA [Medicare Advantage] utilization.” Additionally, “although Medicaid redeterminations are underway, their impact so far has been relatively small.”

Here’s how major health insurers’ stock performed in October 2023. UnitedHealth Group had the highest closing stock price among major commercial insurers as of October 31, 2023, at $535.56. Humana Inc. had the highest closing stock price among major Medicare insurers at $523.69.

The beleaguered startup insurers known as “insurtechs” continued to post losses during the third quarter, but executives from Oscar Health, Inc., Clover Health Investments Corp. and Alignment Healthcare, Inc. all said they expected to at least break even in 2024.

However, Bright Health Group and Friday Health Plans, two insurtechs that have ended their insurance operations, together owe billions in unpaid risk adjustment payments to other insurers that participate in the Affordable Care Act marketplaces. CMS on Oct. 27 released details of payment plans for both firms.

Humana Inc.’s stock dipped after its third-quarter 2023 earnings report, with analysts largely blaming the firm’s revised estimate of its full-year medical loss ratio (MLR). The Medicare Advantage-focused insurer said that while it had been expecting health care utilization to stabilize, instead it continued at the elevated level that Humana first started noticing earlier in the year.

“This morning, we reported that our insurance segment benefit ratio exceeded expectations by 40 basis points due to higher medical costs in our Medicare Advantage business,” Chief Financial Officer Susan Diamond said during the company’s Nov. 1 earnings call. “We continue to experience an increase in COVID admissions in the third quarter, whereas our forecast previously assumed that this would occur in the fourth quarter.”

While the managed care stock story in the first half of 2023 revolved around care utilization concerns, the company that first fueled those worries — UnitedHealth Group — eased investors’ minds considerably when reporting third-quarter earnings.

“Care patterns remain consistent with the view we shared during the second quarter, with activity levels still led by outpatient care for seniors and still most notably in the orthopedic and cardiac procedure categories,” Chief Financial Officer John Rex said, addressing the utilization issue head-on before describing UnitedHealth’s financial results during its Oct. 13 earnings call.

Elevance Health Inc., the parent company of Anthem, enjoyed a strong third quarter, raising its end-of-year earnings guidance and completing a round of stock buybacks. The firm cited a strategic review — which involved layoffs and slashing real estate costs — as a key reason for the results. However, the positive results were dampened by Anthem plans’ middling performance in the newly released 2024 edition of Medicare Advantage Star Ratings, which drew scrutiny from Wall Street.

The strategic review yielded a $697 million boost to the quarter’s balance sheet, with an Elevance press release touting “the write-off of certain information technology assets and contract exit costs, a reduction in staff including the relocation of certain job functions, and the impairment of assets associated with the closure or partial closure of data centers and offices.”

Here’s how major health insurers’ stock performed in September 2023. UnitedHealth Group had the highest closing stock price among major commercial insurers as of September 29, 2023, at $504.19. Humana Inc. had the highest closing stock price among major Medicare insurers at $486.52.

Here’s how major health insurers’ stock performed in August 2023. UnitedHealth Group had the highest closing stock price among major commercial insurers as of August 31, 2023, at $476.58. Humana Inc. had the highest closing stock price among major Medicare insurers at $461.63.

Executives from health insurance firms Centene Corp. and Humana Inc. on Sept. 6 pitched investors on rosy projections for the rest of the year at the 2023 Wells Fargo Healthcare Conference — despite ongoing Medicaid eligibility redeterminations and elevated utilization in Medicare Advantage, particularly around COVID-19 hospitalizations.

In remarks during the conference, Centene CEO Sarah London highlighted the spinoffs and balance sheet restructuring that she has orchestrated since taking over the firm in spring 2022. London said that Centene bought back $200 million of shares in August, and “expect[s] to exceed our original $1.5 billion share repurchase target in 2023.”