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 📚 - Q1 '24 Medicare Carrier Financials Side-By-Side ⛈

3. Compliance Chatter 📢 - DHHS final rule prohibiting discrimination in certain health programs

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

5. Data Visual of the week 📊 - stock performance for Medicare focused Carriers.

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

DEEP DIVE 📚

Q1 2024 Medicare Carrier Financials Side-By-Side ⛈

In this week’s deep dive, we are looking at publicly traded Medicare carrier Q1 2024 financials side-by-side.

Not the best quarter for Medicare focused carriers.

But as we often talk about, the Medicare market is a growing market. So, the long term underlying market remains strong for these companies.

The insurance carriers included in this analysis are all trying to capture a piece of the growing Medicare 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 Q1 2024 revenues between these two segments for each carrier:

As you can see, UNH, ELV and HUM have a larger insurance segment while CVS and CI have a larger services segment.

Income Statement & Membership Side-By-Side

To compare and contrast the Q1 2024 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 Q1 2023 to Q1 2024.

Current Valuation Metrics

Here are current valuation metrics for these carriers.

Higher Loss Ratios / Lower Profits

The overall theme for the quarter was lower profits driven by higher loss ratios.

The higher loss ratios are a function of lower Medicare Advantage funding combined with higher utilization.

Another theme was the Change Healthcare cyber attack which caused major disruption throughout the industry.

Several carriers signaled Medicare Advantage “2025 pull-back” due to headwinds associated with Part D IRA changes, lower funding, and continued higher loss ratios.

See more here:

→ Humana pulls back 2025 guidance following MA rate cut (link)

→ CVS reports $900M cost, lower projections due in large part to high Medicare Advantage utilization (link)

→ UnitedHealth CEO Warns of 3-Year Medicare Squeeze (link)

Notable Observations

Membership

• Overall Medicare Advantage grew 6% combined

• CVS & MOH both saw significant growth in Medicare Advantage Membership (see more on Aetna’s big AEP here) (UPDATE: MOH’s growth due to acquiring Bright Health members)

• Overall Medicaid membership dropped significantly (likely due to Medicaid “unwinding”)

• Commercial grew overall and saw market share shift between carriers (due to growth in ACA market, and Humana exiting the Employer Group market)

Insurance Operations

• Overall, Revenues Up (8%), Operating Profit Down (10%)

• CVS with a drastic example of both!

• As previously mentioned, overall loss ratios were up 2.0% combined!

• Notable that both ELV and CI saw their loss ratios decline

• UNH, HUM and CVS all saw significant increases in loss ratios

Healthcare Services Operations

• Overall, Revenues Up (8%), Operating Profit Down (1%)

• UNH and Humana had notable declines in Operating profit

• ELV and CI saw increases in Operating profit

Consolidated Results

• Again… Revenues Up (8%), Profits Down (8%)

… and, more headwinds ahead… will be interesting to see how these companies navigate the next few years…⛈

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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 Blake Madden’s newsletter “Hospitalogy”, highlighting a drop in stock prices for publicly traded carriers.

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)