Health insurers found
success in Medicare, Medicaid and even the ACA exchanges.
Aug. 8, 2018
Second-quarter
numbers for payers showed a steady engine that has withstood the
strain of the past two years, most notably (the failed) Republican efforts to
tear up the Affordable Care Act and other big moves from the Trump
administration.
Insurers
appear to have found stability and responded by expanding offerings,
pulling back on others, moving into new subsectors and partnering with or
gobbling up other companies.
Payer
underwriting margins were strong overall with no apparent ramp up in underlying
medical consumption, David Windley, managing director for healthcare
equity research at Jefferies in Nashville, told Healthcare Dive.
"2Q
is a critical quarter for (managed care organizations) because it is the point
at which management has seen enough actual data on claims payments to assess
product pricing and any unusual trends," he said.
Here
are five trends and highlights from payers' earnings reports in the past
few weeks.
1.
Payers love Medicare Advantage
Payers
remain bullish on Medicare Advantage. Not only are traditionally strong MA
payers growing their offerings, but more minor players are also expanding in
the market.
UnitedHealth
Group and Humana continue to have the two largest MA member populations.
UnitedHealth’s MA population increased 10.4% year-over-year after picking up
450,000 new members. UnitedHealth views MA as a significant growth area and
company officials said its long-term group rate is about 8%.
Meanwhile,
MA drove Humana’s second-quarter earnings, which included a 5% increase in
quarterly consolidated revenues. In a move to boost its MA plans, Humana
recently purchased a 40% share of Kindred at Home with
the right to buy the remaining interest over time. The payer expects that
adding Kindred will help with end-of-life costs.
Another
insurer growing its MA footprint is WellCare Health Plans. Medicare premium revenue
grew more than 17% for WellCare, which offers managed Medicaid, Medicare and
Medicare pharmacy drug plans.
The
company said the increase was related to buying Universal American and
organic growth. The Tampa-based payer ended the quarter at about 510,000
Medicare members, which was a 5% increase year-over-year.
WellCare's
pending acquisition of Meridian Health Plan for
$2.5 billion is also expected to grow membership in Illinois and Michigan, as
well as pick up MeridianRX, its pharmacy benefit manager business. "It
will position us for future growth opportunities in government-sponsored
programs, and we expect the transaction to be accretive," Kenneth
Burdick, WellCare’s CEO, said during the company's Q2 call.
Anthem
also spoke positively about its MA business, reporting a 14% operating revenue
increase in its government business for the quarter. That was thanks to
purchasing Health Sun and America's 1st Choice as
well as growing its Medicare membership organically.
Medicare
enrollment grew by 254,000 year-over-year and membership in Medicare Advantage
Part D plans skyrocketed by 37%. Anthem finished the quarter with 933,000
Medicare Advantage Part D members.
Anthem
CEO Gail Boudreaux said the company plans to build its membership further by
increasing its county footprint while finding organic growth where it already
operates. She added that the Blues payer has found that members in their
commercial plans want to transition to its MA plans once they reach retirement
age.
"We
have a strong pipeline of commercial customers who want to stay Blue,"
Boudreaux said.
2.
The individual market isn't so bad after all
The
days of widespread double-digit premium increases and payers fleeing the ACA
exchanges appear to be over — or at least on hold.
During
second-quarter earnings calls, multiple payers spoke of the ACA exchanges
positively. Centene, which expanded its ACA footprint to 16 states this year,
pointed to the exchanges as a major reason for its quarterly revenue growth.
The payer, which has a large managed Medicaid population, has found success in
ACA plans.
Centene
is also looking to add new states next and grow further in the states where
it's already located.
Another
payer that focuses on at-risk populations traditionally, Molina Healthcare,
said it has seen better-than-expected ACA plan membership and risk-adjusted
revenue.
Molina
CEO Joseph Zubretsky said the risk profile of its reduced membership is also
better. Last year, Molina pulled out of Wisconsin and Utah. Now, the payer is
contemplating a return to those states and expanding to North Carolina.
"The
issues we had in Utah and Wisconsin were mostly related to a network that was
too wide and too highly priced. And the team is working at developing a network
that will support the prices that we file … We're going to watch every bit of
data emerge on 2018 to make sure we have this right and then we'll make the
call at that point," Zubretsky said during the call.
Even
Anthem, which pulled back on the ACA exchanges along with other big-name payers
last year, is looking at potential minor county expansions for 2019. Boudreaux
said the insurer isn't considering significant expansion, but it may move to
abutting counties while focusing on areas with current Anthem individual plans.
"I
think you'll see some county expansions, but I think more focused on the areas
that we've been this year, so not a major rescaling, but we are pleased with
the performance. And again, it is all about stability and more certainty around
that marketplace. But again, this year was solid," she said.
Despite
the better-than-anticipated ACA numbers, not all payers are interested in
returning to the exchanges. UnitedHealth Group ended the quarter with 60,000
fewer individual plan members than a year ago.
UnitedHealth
Group CEO David Wichmann said the nation's largest private payer, which
has 480,000 individual plan members, will continue a
"modest presence" in that market. "Nothing has
fundamentally changed since we made our decision," he said about the exchanges.
"It was the right decision for us."
3.
Commercial market results fell for some big players
Multiple
payers have seen a drop in their commercial membership over the past year.
UnitedHealth Group, Anthem, Humana and Aetna all reported decreases.
UnitedHealth
Group said more commercial plans are moving to risk-based contracting.
The
payer's risk-based offerings increased by 50,000 members, while fee-based
products decreased by 60,000. That's part of a trend that Wichmann predicted
during the first-quarter call in April.
Wichmann said half of Americans will get care from a physician with a
value-based contract within a decade.
Meanwhile,
two payers, Humana and Aetna, reported that what companies want from payers is
changing, especially small businesses. They're seeing small group companies
moving to contracts to perform administrative duties only.
Humana's
administrative services only plans increased by 3% to 458,800 members. The
payer said small group membership made up just 7% of group ASO membership a
year ago and 12% at the end of 2017. It was 18% at the end of the second
quarter.
Humana's
commercial membership dropped 5% to slightly more than 1 million members as it
lost large group accounts in self-funded accounts, but more ASO plans partially
offset the loss.
Not
all payers are seeing commercial plan decreases. Cigna picked up 329,000
customers year-over-year and ended the quarter with 16.2 million
enrollees. "All the indicators we're seeing ... continue to reinforce
[that] we see a very attractive growth outlook in the commercial space in
2019," Cigna CEO David Cordani said.
Cigna
has focused more on commercial plans after CMS temporarily suspended the payer
from offering MA plans. Cigna got the OK to
sell those plans again last summer.
4.
Payers are looking at public plan opportunities
While
payers are seeing sagging commercial plan membership, they're finding growth
potential in managed Medicaid.
Centene recently purchased Fidelis
Care for $3.75 billion, which gives the payer the fastest
growing Medicaid managed care company in New York and second fastest in MA.
Fidelis' 1.6 million members are spread across the ACA, MA and Medicaid
markets. Centene expects to see more than $11 billion in revenue from Fidelis.
WellCare's
purchase of Meridian will make it the largest Medicaid payer in membership in
Michigan and Illinois, where it has 508,000 and 565,000 members,
respectively. WellCare said the deal will put it in the leading market
position for six states.
WellCare
will also grow Medicaid membership after being the sole winner for Florida's
Children's Medical Services contract. The company expects the contract will
increase its Florida Medicaid annual revenue stream by $1.5 billion.
Molina
picked up nearly 70,000 members in the second quarter after a recent statewide
Illinois contract.
There
are other Medicaid opportunities for payers too, as more states show an
interest in expanding Medicaid. Boudreaux said Virginia's upcoming Medicaid expansion brings
400,000 possible members. Maine voters also approved Medicaid
expansion last year and a growing number of states are putting
expansion on the ballot this
fall.
However,
it is not all positive news for Medicaid payers. Humana's state-based contracts
membership, which includes dual-eligibles, decreased by 13% year-over-year. The
decrease came after the payer didn't participate in Illinois' Integrated
Care program and a Medicaid membership drop in Florida. That said, Humana
expects improved Medicaid membership next year after a new Florida contract.
5.
Industry is in good financial shape
The
second-quarter reports show that payers (and most healthcare companies,
actually) are doing well financially. Axios reported that
publicly-traded healthcare companies enjoyed billions of dollars of profits in
the second quarter. In fact, they’re making more than in Q1, especially
pharmaceutical companies. Those numbers don't include nonprofit hospitals,
which face their own challenges.
Two
financial numbers that stand out are the revenue results for Aetna and Molina.
Aetna stayed stagnant, but it's also in the middle of the CVS Health merger.
Plus, it enjoyed a nearly 8% profit margin in the quarter.
Molina,
meanwhile, went through upheaval over the past year when it ousted CEO Mario
Molina and CFO John Molina, the sons of the company's founder. The payer also
pulled back on the exchanges. Hence, the revenue drop.
Looking
ahead to Q3, Windley expects more of the same for payers. He said
insurance companies will begin to publicly discuss their 2019 plans during the
third-quarter calls, including potential MA growth.
Here's
a breakdown of important metrics to show how payers did in the second quarter:
Revenues:
$15.6 billion
Compared
to 2Q 2017: No change
Profit:
$1.2 billion
Net
profit margin: 7.8%
Membership:
22 million
Revenues:
$22.7 billion
Compared
to 2Q 2017: Up 2.3%
Profit:
$2.4 billion
Net
profit margin: 5.2%
Membership:
39.5 million
Revenues:
$14.2 billion
Compared
to 2Q 2017: Up 19%
Profit:
$300 million
Net
profit margin: 2.1%
Membership:
12.8 million
Revenues:
$11.5 billion
Compared
to 2Q 2017: Up 10%
Profit:
$193 million
Net
profit margin: 1.4%
Membership:
16.2 million
Revenues:
$14.3 billion
Compared
to 2Q 2017: Up 5%
Profit:
$193 million
Net
profit margin: 1.4%
Membership:
16.6 million
Revenues:
$4.9 billion
Compared
to 2Q 2017: Down 2.3%
Profit:
$202 million
Net
profit margin: 4.1%
Membership:
4.1 million
Revenues:
$56.1 billion
Compared
to 2Q 2017: Up 12.1%
Profit:
$2.9 billion
Net
profit margin: 5.2%
Membership:
48.8 million
Revenues:
$4.61 billion
Compared
to 2Q 2017: Up 7.4%
Profit:
$172 million
Net
profit margin: 3.9%
Membership:
4.4 million
https://www.healthcaredive.com/news/5-takeaways-from-payer-q2-earnings-reports/529540/
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