Insurers noticed earnings rise in Q1 as value will increase weighed on hospitals

As increased costs weighed on hospital operators in the first quarter, the nation’s largest insurers saw profits and revenues rise alongside growing membership bases.

The performance spurred payers to raise financial expectations, painting an improved financial outlook for the full year compared to earlier estimates for 2022.

On the other hand, the omicron variant exacerbated challenges for providers as both COVID-19 cases and hospitalizations reached all-time highs in January. Facing increased cost pressure, partly due to pricier labor, some for-profit health systems have lowered financial estimates for the year, including HCA Healthcare, one of the largest systems with 182 hospitals.

The January spike in cases seemed to be somewhat normal patient volume, though payers report volumes were largely back to normal by the end of the quarter.

UnitedHealth Group, parent company to the nation’s largest private insurer with more than 50 million members, noticed “considerable variation in care patterns,” CFO John Rex told investors during the first-quarter call. But by the end of the quarter, volumes were largely back to normal.

United’s medical loss ratio increased compared to the first quarter of last year, a potential signal that care patterns are returning to normal. The payer’s MLR — an important measure that compares the amount an insurer brings in from premiums to the amount it spends on care — was 82% in the quarter, an increase from 80.9% a year earlier.

With a rise in revenue and members, UnitedHealth’s profit climbed 3% to $5 billion, spurring the insurer to raise its financial outlook, increasing its earnings expectations for the full year.

Payers see rise in Q1 profits

Insurers’ net income in the first quarter compared with the prior-year period

Similarly, CVS, parent company to insurer Aetna with more than 24 million members, said care patterns were in line with pre-pandemic levels, though executives noted volumes in its government products were slightly below baseline.

Like United, CVS’ medical loss ratio was higher compared to the first quarter of last year, again suggesting a return to pre-pandemic care patterns.

Meanwhile, Molina and Cigna were able to manage costs despite the early omicron surge.

Molina Healthcare said COVID-19 costs were almost entirely offset by patients deferring care in the quarter even as COVID-19 costs were the highest since the start of the pandemic.

Molina’s profit increased 13% to $258 million alongside increased revenue and membership, prompting the primarily government-sponsored insurer to raise its financial outlook, expecting an additional $750 million in premium revenue.

For Cigna, treatment costs for infected patients were lower in the first quarter despite record case counts. Patients were far less ill compared to prior waves, executives said, as more patients were vaccinated.

Cigna’s profit rose 2% to $1.2 billion on increased revenue and membership, leading the insurer to raise its full-year forecasts. It now expects adjusted operating income to reach $7.05 billion, an increase of $100 million from its prior guidance.

Insurers noted widespread membership growth in the first quarter.

Insurers record membership increases

The number of covered members at the close of the first quarter compared with the prior-year period.

Anthem’s first-quarter membership of nearly 48 million grew by 3.4 million members, more than 7%, compared with the first quarter of last year. Executives attributed the growth to the strongest selling season in the company’s history and the acquisition of an Ohio Medicaid plan.

Also, continued pandemic-era protections for patients helped fuel enrollment.

For Centene, membership increased nearly 8% to 26.2 million members due in part to a freeze on Medicaid eligibility checks.

To protect patient access to coverage during the pandemic, federal lawmakers barred states from kicking patients off coverage by mandating a pause in eligibility determinations. Centene said it expects redeterminations — when states check whether Medicaid members are still eligible for the subsidized insurance coverage — will begin in August.

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