Here is what you’ll find in this week’s newsletter!

1. Important links 🔗 - the best articles we found this week about the Medicare Market along with links to Jared’s recent LinkedIn posts.

2. Deep Dive 📚 - Calendar Year '23 Carrier Financials Side-By-Side ❤️

3. Compliance Chatter 📢 - Can Medicare Advantage plans utilize algorithms or artificial intelligence (AI) to make coverage decisions after January 1, 2024?

4. Sponsor Snapshot 🚀 - brought to you by Modivcare.

5. Data Visual of the week 📊 - Data Visual highlighting increase in Medicare Loss Ratios.

It’s only a 5 minute read, but it will make you 10x smarter.

DEEP DIVE 📚

2023 Medicare Carrier Financials Side-By-Side ❤️

In this week’s deep dive, we are looking at publicly traded Medicare carrier calendar year (“CY”) 2023 financials side-by-side.

As we’ve previously explored, the Medicare market is a growing market.

The insurance carriers included in this analysis are all trying to capture a piece of that market (along with other insurance markets), and do so profitably. Here they are:

• UnitedHealth Group (“UNH”)

• Elevance Health (“ELV”)

• Centene Corp. (“CNC”)

• Humana (“HUM”)

• Molina (“MOH”)

• CVS (“CVS”)

• Cigna (“CI”)
  

Aside from Centene and Molina, these carriers have both health insurance operations and healthcare services operations (providers, PBMs, pharmacies, etc.).

Here is the split of 2023 revenues between these two segments for each carrier:

Income Statement & Membership Side-By-Side

To compare and contrast the calendar year 2023 results for each carrier, the Income Statement is split between “Insurance Operations” and “Healthcare Service Operations”. The consolidated statement is also displayed.

One Note: Healthcare Service Operations is different for each carrier, but generally includes providers, pharmacies, PBMs, and technology.

YoY % Change

Here is the % change in key metrics from CY 2022 to CY 2023.

Current Valuation Metrics

Here are current valuation metrics for these carriers.

Higher Loss Ratios

Higher Medical Loss Ratios (“MLR”) was a common theme in 2023 for these carriers.

Generally speaking, they all saw higher loss ratios in their Medicare blocks specifically.

Those with a larger share of business coming from Medicare products (UNH, HUM, CVS) all ended 2023 with higher loss ratios compared to 2022.

UNH up 1.2%, HUM up 1.4%, CVS up 2.9%.

Several companies mentioned the higher loss ratios in their year-end financial earnings releases. Here is a sampling.

• CVS → “These increases were primarily driven by increased utilization in Medicare Advantage, including outpatient and supplemental benefits…”

• HUM → “reflect additional increase in Medicare Advantage medical cost trends, driven by higher than anticipated inpatient utilization, primarily for the months of November and December, and a further increase in non-inpatient trends, predominantly in the categories of physician, outpatient surgeries and supplemental benefits…”

• CNC → “The increase is primarily driven by the $250 million premium deficiency reserve recorded in connection with the 2024 Medicare Advantage business.”

• UNH → “…driven by previously noted outpatient care, primarily serving seniors, and business mix.”

• MOH → “…reflecting higher utilization of supplemental benefits, in-home services, and high-cost drugs throughout the year.”

Notable Observations

A few other notable observations.

Combined, these carriers generated $1.39 trillion in Revenues and $71.7 billion in operating income in 2023.

Membership

• 8% Combined Medicare Advantage member growth 

  • led by Humana (15% growth)

  • Centene lost 15% of Medicare Advantage members

• Medicare Supplement membership down slightly

• Medicaid saw significant decline likely due to redetermination

Insurance Operations

• Combined 11% revenue increase led by Humana & CVS (16%)

• Combined Medical Loss Ratio increase of 0.7%

  • CVS (2.9%) saw the largest increases

• Combined profit margin flat

  • 4 of the Companies grew profit margin, the other’s profit margins fell

Healthcare Services Operations

• Combined 14% revenue increase led by UNH (24%)

• Combined profit margin flat

Consolidated Results

• Combined revenue up 11%

• Combined operating profit up 21%

• Even though profit margins for Insurance Operations segment and Healthcare Services segments were both flat; the consolidated profit margin increased 0.4%. This is due to the impact of vertical integration!

Cigna MA block

• Also of note is that Cigna announced they are selling their block of Medicare Advantage/Medicare Supplement/PDP business to HCSC.

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Sources: Carrier quarterly financial earnings releases, 10-Qs and 10-Ks.

DATA VISUAL of the Week 📊

The data visual of the week comes from Union Healthcare Insight. It highlights the increase in loss ratios for Carriers with higher proportion of Medicare Advantage business.

If you’re ready, here are some ways we can help you:

• Newsletter Sponsorship opportunities: Promote your product or services to leaders in the Medicare space. Let’s discuss. (link)

• Market Research: Reports that help you wrap your arms around the Senior focused insurance markets. (link)

• Consulting: We can help you develop new insurance products for the Medicare market, appraise your books of business, and keep you compliant. Let’s discuss. (link)