Stock Performance

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.”

Three of the four startup “insurtech” health plans made progress toward profitability in the second quarter of 2023, according to Wall Street analysts and one health care industry insider. But Bright Health Group, Inc., the highly leveraged firm that is winding down its health plan operations, has significant liquidity problems, massive outstanding risk adjustment debt and may lose the lifeline of its deal to sell its remaining health plan assets to Molina Healthcare, Inc.

Bright Health is in the process of winding down all of its health insurance operations. The firm posted a net loss of $251 million in the second quarter.

On Aug. 7, two days before Bright’s quarterly earnings call, it secured a $60 million credit facility from one of its largest creditors, venture capital firm New Enterprise Associates (NEA). In a press release announcing the loan agreement, Bright added that it “has entered into a permanent waiver of default on its existing credit facility, which expires in February 2024.” That agreement, made with a consortium of banks led by JPMorgan Chase Co., extended Bright a $350 million line of credit earlier this year.

Here’s how major health insurers’ stock performed in July 2023. UnitedHealth Group had the highest closing stock price among major commercial insurers as of July 31, 2023, at $506.37. Humana Inc. had the highest closing stock price among major Medicare insurers at $456.83.

CVS Health Corp. beat Wall Street’s consensus second-quarter earnings projections, but it raised concerns among analysts by lowering its earnings guidance for 2024. Humana Inc., meanwhile, also beat the Street’s second-quarter earnings estimate. Both firms reported that this year’s high utilization levels in Medicare Advantage — a source of consternation for investors — persisted.

Overall, CVS took in $88.9 billion in the second quarter, up $8.2 billion year over year. However, its quarterly, year-over-year operating income decreased by $521 million to $4.48 billion; adjusted earnings per share (EPS) amounted to $2.21, down from the second quarter of 2022’s $2.53. CVS confirmed its full-year EPS guidance of $8.50 to $8.70.

UnitedHealth Group saw higher-than-expected utilization in the second quarter, driven by seniors and those seeking behavioral health care. However, the company kept its full-year adjusted earnings per share (EPS) guidance intact, indicating that it expects that it can offset the higher costs associated with increased utilization.

For the quarter, UnitedHealth had a medical loss ratio (MLR) of 83.2%, up from 81.5% in last year’s second quarter and from 82.2% in this year’s first quarter. That was due primarily to an increase in the number of members who sought care during the quarter, particularly in seniors who had delayed outpatient orthopedic and cardiac surgeries during the coronavirus pandemic.

John Rex, UnitedHealth’s Chief Financial Officer, told analysts during a July 14 conference call that the company filed its 2024 Medicare Advantage offerings with the assumption the elevated level of seniors seeking care will persist into next year.