Stock Performance

Medicare, Medicaid Segments May Be a ‘Mess,’ but Bounce-Back Expected

Although insurers have bet big — and cashed in — on privatized Medicare and Medicaid plans, recently those business lines have shown some signs of distress.

For example, Humana Inc. and CVS Health Corp.’s Aetna this week put concrete numbers behind the Medicare Advantage membership losses that they expect to sustain next year due to significant headwinds facing the MA industry. And heightened medical loss ratios in managed Medicaid dinged the otherwise solid first-quarter 2024 financial results recently reported by Centene Corp. and Molina Healthcare, Inc.

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Not in Kansas Anymore: Aetna Gets Left Out of Medicaid Awards

Ousting CVS Health Corp.’s Aetna from the current roster of Medicaid managed care organizations serving the Kansas Medicaid program, Elevance Health, Inc.’s Healthy Blue was chosen as the third insurer for new KanCare contracts starting Jan. 1, 2025. Incumbents Sunflower Health Plan (Centene Corp.) and UnitedHealthcare Community Plan held onto their spots. The awards mark the latest in a string of wins for Centene and Elevance and another disappointment for Aetna.

According to results posted by the Kansas Dept. of Health and Environment on May 14, seven MCOs responded to the request for proposals (RFP) process that began in October 2023 after a delay. Serving nearly 154,000 enrollees, UnitedHealthcare currently has the biggest share of the Kansas Medicaid market, per AIS’s Directory of Health Plans. Aetna, meanwhile, serves nearly 133,000, or about 31% of KanCare enrollees.

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MCO Stock Performance, April 2024

Here’s how major health insurers’ stock performed in April 2024. Elevance Health, Inc. had the highest closing stock price among major commercial insurers as of April 30, 2024, at $528.58. Humana Inc. had the highest closing stock price among major Medicare insurers at $302.09.

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Cigna Posts Strong First-Quarter Results Despite VillageMD Writedown

In its first quarter results, The Cigna Group’s low care utilization numbers and focus on stock repurchases garnered the commercial insurance giant positive reviews from Wall Street analysts — despite a net first-quarter loss that executives attributed that loss to a $1.8 billion writedown on Cigna’s VillageMD joint venture with Walgreens Boots Alliance Inc. Cigna also raised its full-year adjusted earnings per share (EPS) guidance by $0.15.

Cigna lost $277 million in the first quarter due to the VillageMD writedown, compared to a $1.2 billion profit in the first quarter of 2023. However, total revenue increased, with the firm taking in $57.2 billion for the first quarter, a year-over-year increase of over $10.7 billion. EPS for the first quarter of this year will be -$0.97. However, full-year EPS guidance increased to $28.40, in large part because Cigna posted a first-quarter medical loss ratio (MLR) of 79.9%, down 140 basis points year over year

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High MA Utilization Spurs CVS 1Q Earnings Miss, Selloff

CVS Health Corp.’s poor Medicare Advantage results in the first quarter of 2024 made the diversified health care and retail company the object of Wall Street’s ire. Analysts were highly critical of the firm’s performance, and the company’s stock price declined sharply on May 1, the day that the results were released.

CVS Chief Financial Officer Thomas Cowhey said during a May 1 earnings call that CVS’s MA segment is poised to “lose a significant amount of money this year.”

CVS’s MA care utilization was notably high, even compared to other listed insurers, who have also had to muddle through high utilization in MA over the past year. According to a press release on the firm’s first-quarter results, medical loss ratio (MLR) for the entire health benefits division during the quarter was 90.4%, up 5.8% year over year.

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News Briefs: OIG Chief Says Agents Are ‘Struggling to Keep Up’ With Medicare, Medicaid Fraud

Testifying before the U.S. House Committee on Energy and Commerce, HHS Inspector General Christi Grimm identified Medicare Advantage risk adjustment and durable medical equipment as two areas at risk for fraud and improper payments. The current MA payment structure, which adjusts payments based on the relative health of beneficiaries, “creates an incentive for managed care plans to make patients appear sicker simply to claim payments to which they are not entitled,” she told representatives during the April 16 hearing. She noted that OIG identified MA overpayments across 33 audits totaling more than $500 million, an amount that “is likely just the tip of an iceberg.” She said these issues raise questions about the accuracy of the data and whether patients are receiving needed treatment. In addition, OIG’s work looking at Medicaid managed care demonstrates that “states need better, more useful data that would ensure states are not paying for deceased enrollees or paying for an enrollee who has moved to another state,” she said. OIG is “struggling to keep up” with the pace of the growing health care industry and is “declining 300 to 400 viable fraud cases per year because we don’t have the agents to work them,” she added.

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Analyst: Humana’s Low Share Price Could Draw Cigna Takeover Attempt

With Humana Inc.’s share price slumping in recent months, one Wall Street analyst points out that conditions may be better than ever for a possible takeover of the Medicare Advantage insurer by The Cigna Group.

“The math now works for a [Cigna] + [Humana] fusion even with [Humana’s] lower EPS [earnings per share],” wrote Jefferies analyst David Windley in an April 22 note to investors. The two managed care giants were rumored to be in talks to combine at the end of 2023, but the Wall Street Journal reported on Dec. 10 that the firms were walking away from the deal. But that was before Humana cut its full-year EPS outlook when reporting its fourth-quarter 2024 results earlier this year, citing a trend of higher-than-expected utilization that has bogged down the MA-focused carrier’s results since the beginning of 2023.

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MCO Stock Performance, March 2024

Here’s how major health insurers’ stock performed in March 2024. Elevance Health, Inc. had the highest closing stock price among major commercial insurers as of March 28, 2024, at $518.24. Humana Inc. had the highest closing stock price among major Medicare insurers at $346.72.

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Bright Health Gave CEO $2M Bonus Despite Owing Insurers Millions

Although NeueHealth Inc. — formerly known as Bright Health Group Inc. — still owes a substantial sum of money to health insurers and is struggling to stay afloat, its CEO received a $1.95 million cash bonus last year, according to a new regulatory filing.

“It really is just a mockery of good governance and fairness at this point,” remarks Ari Gottlieb, principal of A2 Strategies and a prominent critic of Bright and other startup "insurtech" firms.

NeueHealth did not respond to AIS Health’s questions about the basis for the bonus earned by G. Mike Mikan, who has served as the firm’s president and CEO since April 2020.

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Analyst Reports Underscore Headwinds Facing Medicare Advantage Insurers

Recent reports from Wall Street analysts are shining a spotlight on challenges faced by UnitedHealth Group and Humana Inc., which are major players in the Medicare Advantage market. In particular, the authors cited increased utilization and potential lower reimbursement as reasons for pessimism, and they said they would be closely watching what insurers say during their upcoming first-quarter earnings calls.

Analysts’ concerns echo the sentiments that UnitedHealth and Humana executives expressed during their fourth-quarter earnings calls in January. However, it remains to be seen whether these are short-term trends or will continue for a longer period of time.

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