The seven publicly traded national plans had a rough 2024 and hope to realign in 2025
I often talk about the nine major health insurers prominent at the national level in Medicare Advantage (MA). Seven of them are publicly traded while two – integrated delivery system Kaiser Permanente and Big Blue mutual Health Care Service Corporation — are non-profits. Four of the seven actually are owned by large vertically integrated companies. With the close of 2024 and reporting of final results, I thought it would be good to recap performance of the seven publicly traded big national companies. The Healthcare Dive had a great article summing it all up. I substantially based this blog on its analysis, which is at the link at the end of this blog.
The insurers
The results by and large show the seven insurers had a fairly troublesome 2024 but hope to realign and improve financial results in 2025. The seven are:
- UnitedHealth Group, the biggest insurer and vertically integrated healthcare company. Its services entity is Optum, which includes pharmacy benefits manager (PBM) OptumRx. United’s insurer is diversified across multiple lines of business.
- Elevance Health, a vertically integrated healthcare company as well. Its services entity is Carelon. Its insurer is also diversified across multiple lines of business.
- CVS Health, a vertically integrated healthcare company with CVS Caremark PBM, CVS pharmacies, and insurer Aetna, among other assets. Its insurer is diversified across multiple lines of business.
- The Cigna Group, a vertically integrated healthcare company including its growing service entity, Evernorth. Within Evernorth is Express Scripts PBM. Cigna is dominant in commercial coverage and is selling its smaller MA line. It got out of Medicaid earlier.
- Humana, MA dominant insurer with some growing Medicaid lives. It has largely divested of its commercial line.
- Centene, a Medicaid dominant insurer with MA and Part D lines.
- Molina, a Medicaid dominant insurer with some MA business.
With all of the financial results reported, we now know the following:
Surging medical expense
Medical expense at the companies’ insurance divisions surged in 2024, driven by a return of utilization and some inflation. The medical expense increase affected all lines of business – MA, Medicaid, and commercial – but was worse in government programs. The medical loss ratio (MLR) for the insurers increased an average of 2.8 percentage points from Q4 2023 to Q4 of 2024.
In that timeframe the following occurred for each insurer:
- Although it started from a better place, commercial and MA insurer Cigna had the highest MLR increase, moving from 82.2% to 89.9, a 7.7 percentage point change.
- Multi-line of business Aetna performed poorly as well, moving from 88.5% to 94.8%, a 6.3 percentage point difference.
- Multi-line of business Elevance Health moved from 89.2% to 92.4%, a 3.2 percentage point change.
- Multi-line of business United Healthcare moved from 85% to 87.6%, a 2.6 percentage point change.
- Medicaid-dominant Molina moved from 89.1% to 91.2%, a 2.1 percentage change.
- MA-dominant Humana moved from 91.5% to 92.1%, a 0.6 percentage point change.
- Medicaid-dominant Centene’s MLR went from 89.5% to 89.6%, a 0.1 percentage point change.
Lower margins
All but two insurers had lower Q4 2024 margins at their insurance divisions vs. Q4 2023. Just Centene and Molina reported better quarterly results in their insurance divisions. This is somewhat odd given the fact that Medicaid rates are problematic with the rollback of enhanced Medicaid matching rates post-COVD pandemic. All seven companies did have year-over-year increases in revenue. Results came out this way:
- Aetna posted an operating loss of $757M in Q4 2024 vs. a profit of $266M in Q4 2023.
- Humana’s insurance division posted a loss of $646M in Q4 2024 vs. a $426M loss in Q4 2023.
- Elevance’s health insurer’s operating income fell 73% from Q4 2023 to Q4 2024.
- Cigna’s health insurer profits were down 47% from Q4 2023 to Q4 2024.
- UnitedHealthcare’s operating income was down 5% in Q4 2024 vs. Q4 2023.
- Centene was up from $45M in Q4 2023 to $283M in Q4 2024.
- Molina was up from $216M in Q4 2023 to $251M in Q4 2024.
The lower margins were a combination of the much higher MLRs and lower revenue in MA and Medicaid.
What does the future hold?
This year will continue to be a recovery year. Insurers seem to have improved in 2024 and that will continue in 2025.
Insurers in MA clearly augmented benefits too much in the past. Health plans have had to make significant benefit and geographic footprint reductions in MA in 2025 to begin to turn that line around. Many MA plans shed unprofitable enrollment in 2025. MA plans have seen two years of rate cuts – 2024 and 2025 – and could see an inadequate increase in 2026. Many likely will have to cut back again for 2026 if the proposal does not change. United and Elevance are far more bullish on MA and plan on adding lives in 2025. United has already added 384K for 2025 and Elevance 242K.
Medicaid rates have been challenging. As redeterminations returned in 2023, rate hikes have not been adequate to deal with rising risk as enrollment dropped. In addition, states are losing the enhanced Medicaid match from COVID. Some insurers say they are optimistic that states will boost rates given the rising adversity of the rolls, but I think insurers are being too optimistic here.
On the medical expense side, 2025 will continue to be challenging. Employer group and commercial coverage are expected to see trends of 6% to 8%. All lines of business are being challenged by rising drug costs, especially in the areas of GLP-1s, specialty drugs, and cancer drugs. Utilization is forecast to continue to climb. Four of the seven plans say they will see even higher MLRs in 2025.
What might the Trump administration and Congress do?
MA plans are hopeful that the final rate notice due in April for 2025 will give some relief from what is viewed as an inadequate rate. I see this as a longer shot than not right now given all going on in D.C. It is more likely that overpayment and risk adjustment reform will be passed by Congress. This could hit rates more deeply in the future.
The budget reconciliation bill could mean some Medicaid cuts, which would hit Centene and Molina hard perhaps both on the revenue and enrollment front. At the same time, if the enhanced premium subsidies in the Exchange expire, that would hurt Centene even more on both revenue and enrollment.
There is a chance that site neutral payments in Medicare could pass. This could offer MA and commercial plans lower costs in the future.
Sources and additional reading:
https://www.healthcaredive.com/news/health-insurer-medical-costs-climbing-ma-medicaid/740611
#healthplans #medicalexpense #mlr #rates #margins
— Marc S. Ryan
