Care Deferrals Show Negative Impacts on MA Risk Adjustment Payments in 2021

by Lauren Flynn Kelly

Although many publicly traded insurers touted enrollment growth from the 2021 Medicare Annual Election Period (AEP) when reporting fourth-quarter and full-year 2020 earnings, some expressed the concern that care deferrals seen last year may have a negative impact on Medicare Advantage risk adjustment payments this year.

Humana Inc. on Feb. 3 posted a loss of $2.30 per share on an adjusted basis, which was driven by three main factors: (1) higher treatment and testing costs related to COVID-19 that were more than offset by a decline in non-COVID utilization, (2) ongoing pandemic relief efforts, and (3) increased expenses associated with the AEP. Humana ended the year with approximately 4.6 million total MA members, reflecting year-over-year growth of 11%, driving consolidated revenue growth of 90% in 2020.

Adjusted EPS for the full year was $18.75, and the Medicare-focused insurer expects to achieve $21.50 per share at the midpoint for 2021. That includes an estimated Medicare risk adjustment headwind of approximately $700 million to $1 billion, representing 1% to 1.5% of Medicare premium for the full year.

For the full year of 2020, Cigna Corp. reported adjusted EPS of $18.45, in line with expectations that included the "ongoing elevated cost of COVID-19-related services," stated President and CEO David Cordani during a Feb. 4 earnings call.

For 2021, the company expects to achieve at least $20 adjusted EPS, which includes the "expected COVID-19 related headwind of approximately $1.25 per share," said CFO Brian Evanko. He clarified that is related to Cigna's limited ability to collect "all of the risk adjustment codes" that it would gather in a typical year "due to the unique nature of 2020 and the COVID-19 headwinds."

Molina Healthcare, Inc. — which recorded a loss of $3.80 per share in the quarter — also said it expects its 2021 earnings to be impacted by care deferrals. For 2021, Molina anticipates adjusted EPS with a midpoint of $12.75, compared with the "normalized" EPS of $12.97 for 2020. That guidance, which includes the continuation of COVID risk-sharing corridors in Molina's Medicaid programs, also reflects the challenge of lower-than-expected Medicare risk scores.

Lastly, CVS Health Corp. on Feb. 16 reported fourth-quarter adjusted EPS of $1.30 — beating Wall Street's projections of $1.24 — and full-year EPS of $7.50. For 2021, the company said it is targeting an adjusted EPS range of $7.39 to $7.55.

From RADAR on Medicare Advantage