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Publicly traded health insurance companies enjoyed a profitable first quarter in 2023.
But uncertainty looms about how the year will shake out for the insurance industry, which experienced strong performances during the COVID-19 pandemic. Investors are concerned about how regulatory updates will impact Medicare Advantage plans and risk-bearing providers, how Medicaid redeterminations will shake out, and how legislation targeting pharmacy benefit managers would impact operations and profits.
Here’s a snapshot from the latest round of earnings reports.
UnitedHealth Group
Industry leader UnitedHealth Group was the most profitable, with net income increasing 16% to $8.1 billion and revenue up 15% to $91.9 billion.
The company’s insurance arm UnitedHealthcare saw net income rise 14% to $4.3 billion, boosted by higher Medicare Advantage and exchange membership and lower medical expenses. UnitedHealthcare had 47.6 million U.S. members, up 4.6%.
Healthcare services subsidiary Optum’s net income rose 19% to $2.7 billion as revenue grew 25% to $54.1 billion, driven by higher volumes of OptumHealth patients and OptumRx prescriptions. Optum is the largest employer of physicians at 70,000, and expects to add another 10,000 this year. The company last week submitted an all-cash bid of nearly $3.3 billion for Amedisys, the second-largest home health provider.
Elevance Health
Elevance Health reported net income growth of 16.6% to $2.8 billion on revenues of $41.8 billion, driven by growth in government-sponsored insurance and its PBM, CarelonRx.
The insurer, which sells Blue Cross and Blue Shield policies in 14 states, had 48.1 million members as of March 31, the most of any carrier.
CVS Health
CVS Health reported the third-largest net income during the quarter of $2.1 billion, with acquisitions of home health company Signify Health, primary care chain Oak Street Health and drugmakers’ restrictions on 340B contract pharmacy sales dragging profits down 8.7%.
The company’s Aetna subsidiary reported a 4% decline in net income to $1.4 billion on a 12.1% boost in revenue to $25.8 billion. Higher utilization and medical costs negatively affected the financial performance. Membership increased by 1 million to 25.5 million, with exchange enrollees representing the lion’s share of new customers.
CVS Health lowered its profit guidance by $1 billion for 2024 after a decline in Medicare Advantage star ratings this year caused Aetna to lose out on big bonuses. In addition, the Centers for Medicare and Medicaid Services modified how Medicare Advantage plans are audited and paid, but Aetna won’t be affected, CVS Health CEO Karen Lynch told investors.
Cigna Group
Higher premiums and prescription growth drove Cigna’s net income up 5.8% to $1.2 billion as revenue rose 5.7% to $46.5 billion. The company operates the second-largest PBM, Express Scripts, which generates 20% of its pretax profits from spread pricing, a practice in which PBMs charge payers more for drugs than they reimburse pharmacies and then retain the difference.
Cigna CEO David Cordani reassured investors that Express Scripts would be able to adjust its operations if Congress were to ban spread pricing. Several states already prohibit it.
Humana
Humana net income rose 33.3% to $1.2 billion and revenue improved 12% to $26.7 billion as Medicare Advantage membership rebounded. After missing growth targets last year, Medicare Advantage enrollment increased 11.1% to 5.6 million, outpacing the industry average. Humana is the second-largest Medicare Advantage insurer by membership.
Humana executives do not expect the changes to Medicare Advantage audits and payments will impede enrollment growth. But the company’s CenterWell healthcare services division could be challenged by new rules regarding risk-sharing and is carrying out a mitigation plan, Chief Financial Officer Susan Diamond told investors.
Centene
Centene reported a 33% increase in net income to $1.13 billion on revenues of $38.8 billion. The company’s health insurance exchange business improved and its medical expenses diminished during the quarter.
The insurer expects to lose money on Medicare Advantage this year after CMS altered the star ratings program. Among large insurers, Centene reported the biggest ratings drop after regulators resumed more stringent quality evaluations. Humana also continued to divest assets outside its core insurance business as it seeks to boost its valuation.
Centene is a leading Medicaid managed care and health insurance exchange carrier, which offers challenges and opportunities during Medicaid redeterminations. Although the company may lose members when states trim Medicaid rolls, it aims to convert as many as possible to exchange coverage.
Molina Healthcare
Molina reported a net income increase of 24.4% to $321 million on revenue growth of 4.8% to $8.1 billion.
The company benefited from new Medicaid managed care contracts, but its status as the second-largest Medicaid insurer by membership exposes it to losses during Medicaid redeterminations. The company expects enrollment to shrink by 400,000 people and its revenues to decline $1.6 billion.
The Insurtechs: Alignment Healthcare, Bright Health Group, Clover Health and Oscar Health
Health insurance startups narrowed their losses during the quarter as most sought to pivot their strategies to improve future performances.
Alignment Healthcare’s net loss shrunk 8.4% to $37.3 million and revenue increased 27.1% to $439.2 million as Medicare Advantage membership grew.
Clover Health enrollment fell slightly because the company scaled back its ACO REACH participation. The insurer’s net loss declined 3.8% to $72.6 million and revenue fell 39.6% to $527.8 million.
Bright Health revenue increased 23% to $756.3 million and its net loss improved 42% to $94.7 million, but the company is in the midst of completely exiting the health insurance business amid severe financial problems.
Oscar Health’s net loss went down 48.7% to $39.6 million and revenue went up 51% to $1.4 billion after the company hiked premiums, improved risk-code capture and renegotiated vendor contracts. The company announced near the end of the quarter that former Aetna CEO Mark Bertolini would succeed co-founder Mario Schlosser as chief executive. Shortly after, Oscar Health began to withdraw from the Covered California health insurance exchange and revealed plans to reconsider its exit from the Medicare Advantage business.
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