Stock Performance

If Direct Contracting Model Dies, MA Startups Could Suffer

Some Medicare Advantage insurers could take a hit if HHS decides to cancel an increasingly controversial care delivery model that allows participants to share risk and receive capitated payments for serving fee-for-service (FFS) Medicare beneficiaries.

The Global and Professional Direct Contracting (GPDC) model fully launched in April 2021, with 53 Direct Contracting Entities (DCEs) participating. Although most DCEs were provider-led organizations such as Iora Health, some MA insurers also threw their hats into the ring, including startup Clover Health; Humana Inc., under the CenterWell brand name; and Anthem, Inc., under the CareMore brand name.

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Centene’s MA Gains Swell Stock, But Could Have Downside

Centene Corp.’s shares rose following its fourth-quarter and full-year 2021 earnings release on Feb. 8, with the market seemingly impressed with the insurer’s Medicaid and Medicare Advantage membership gains. Still, one equities analyst sounded a note of skepticism about what large MA enrollment gains will mean for Centene’s margins.

“Outsized share gains in MA are typically a cautionary sign for margin,” Jefferies analyst David Windley wrote in a Feb. 8 note to investors. Centene’s management “is signaling flat ’22 MA margin, but is flat still optimistic with multiple competitors calling out CNC’s aggressive pricing?”

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MCO Stock Performance, January 2022

Here’s how major health insurers’ stock performed in January 2022. UnitedHealth Group had the highest closing stock price among major commercial insurers as of Jan. 31, 2022, at $472.57. Humana Inc. had the highest closing stock price among major Medicare insurers at $392.50.

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Specialty Pharma Is Top of Mind for PBM Execs in Earnings Calls

While the cost-saving potential of biosimilars was an overarching theme as the major PBMs’ parent companies discussed second-quarter 2021 earnings, “specialty” was the buzzword during the most recent round of conference calls regarding fourth-quarter and full-year 2021 financial results.

“I would definitely say that the specialty [pharmacy] and home delivery business are contributing to earnings and our margin,” said Heather Cianfrocco, CEO of UnitedHealth Group-owned PBM OptumRx, during a Jan. 19 call with analysts.

MCO Stock Performance, December 2021

Here’s how major health insurers’ stock performed in December 2021.

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MCO Stock Performance, November 2021

A look at how major publicly traded insurers’ stock performed in November 2021.

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Optum Dominates UnitedHealth’s Investor Day, Growth Strategy

UnitedHealth Group’s Investor Day presentation, Wall Street analysts came away with the distinct impression that the company’s Optum division — which now comprises 52% of its overall earnings — was the “star of the show.”

UnitedHealth’s annual investor day “featured a heavy dose of the integration and collaboration” between Optum and UnitedHealthcare, the company’s health insurance division, to drive its long-term target of 13% to 16% earnings per share (EPS) growth, Citi analyst Ralph Giacobbe wrote in a Nov. 30 note to investors.

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MCO Stock Performance, October 2021

MCO stock performance in October 2021

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Big Three PBMs’ 3Q Results Make Up for Insurer Disappointments

The three largest PBMs — Cigna Corp.’s Express Scripts, UnitedHealth Group’s OptumRx, and CVS Health Corp.’s Caremark — each posted strong results in the third quarter of 2021. Indeed, those PBMs were essential — in the eyes of Wall Street — to making up for the impact of COVID-19 on the profitability of their parent companies’ health insurance subsidiaries.

Cigna Corp.’s Evernorth, the parent company of Express Scripts, took in $31.9 billion in pharmacy revenue for the first three quarters of 2021, up from $28.7 billion in the same period during 2020. Wall Street analysts were bullish on Evernorth and Express Scripts despite skepticism of Cigna’s overall performance.

MLRs Run Sky-High for Newly Public Insurer Startups in 3Q

The third quarter of 2021, to put it mildly, was a tough one for three out of the four startup health insurers that have gone public in the past year.

In particular, individual market-focused Oscar Health, Inc. and Bright Health Group, Inc. struggled with controlling medical costs despite their rising revenues. Oscar recorded a $212 million net loss — eclipsing its net loss of $79 million in the third quarter of 2020 — and a medical loss ratio (MLR) of 99.7%, while its revenues rose 336% year over year. Bright Health reported a $296 million loss (compared with a $59 million loss in the year-ago quarter) and a 103% MLR, and its revenues jumped 206%. Health insurers typically try to keep their MLRs in the mid-80% range to comply with federal regulations while also tightly managing medical costs.

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