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Commercial, Managed Care Insurance Sectors Profits Boom in Q3

Commercial and managed care payers experienced high profits, lower claims spending, and enrollment growth during the third quarter of 2018.

Commercial and managed care payers

Source: Thinkstock

By Thomas Beaton

- Commercial and managed care payers experienced significant third quarter profits, reductions in healthcare spending, and enrollment growth, according to the latest financial statements from insurance companies.

Medicare Advantage (MA), Medicaid managed care, and commercial group health plans experienced upticks in member enrollment and profitability.

A few of the largest commercial payers are also expecting even sharper growth in profitability as they pursue mergers with pharmacy benefit managers (PBMs) to vertically integrate medical and prescription drug insurance businesses.

Moving into 2019, many payers will be in very strong positions to continue their financial growth and offer enhanced services to their members.

Cigna’s employer-sponsored segment in Q3 drives $3.84B outlook for 2018

Cigna expects to earn total profits of $3.84 billion by the end of 2018 after recording $744 million in net income during Q3.

The payer’s third quarter incomes were $212 million higher than Q3 in 2017. Significant membership growth in the employer-sponsored market contributed to the company’s profits. Cigna’s commercial group health plan membership has grown by 400,000 beneficiaries since last year, while individual health plan membership has increased by 363,000 members

Cigna also reported cost-effective medical loss ratios (MLRs) in both its commercial and government-sponsored business segments. Third-quarter MLRs for commercial and individual ACA plans were 76.3 percent and 80.6 percent, respectively.

Financial performance is expected to increase after the Cigna-Express Scripts merger closes, according to Cigna leadership.

“Cigna continues to provide more affordable, personalized solutions for our customers and clients, enabling us to deliver strong results,” said David M. Cordani, Cigna President and CEO. “Looking ahead to 2019, we expect to continue driving innovation, growth and value, all of which will be further enhanced through our pending combination with Express Scripts.”

Aetna Medicare and Medicaid segments bolster billion-dollar third-quarter income

Aetna reported a net income of $1 billion in the third-quarter of 2018.

Enrollment growth contributed significantly to the income total. Since June of 2018, Aetna’s commercial membership has grown by 30,000 members. The payer’s Medicare Advantage membership has grown by 16,000 members while managed care membership has increased by 13,000.

Medical loss ratios for the payer’s government health plans decreased from Q3 of 2017, while commercial MLRs increased.

Medicare and managed care health plan MLRs decreased from 82.4 percent to 79.3 percent between 2017 and 2018, indicating higher profitability of premium revenues during the quarter. Commercial plan MLRs increased from 81.3 percent to 84.7 percent during the same time.

The payer also noted that the recent Tax Cuts and Jobs Act, and associated lower corporate tax rate, helped offset losses from the payer’s exit from the federal health insurance exchanges. Aetna’s estimated losses of $130 million due to provider arbitration related to leaving the ACA exchanges.

In addition, the pending CVS-Aetna merger is likely to accelerate growth. Both CVS and Aetna expect the merger to close after the Department of Justice said it will approve the deal.

“Our financial performance demonstrates a continued focus on delivering solid operating results as we prepare to close our pending transaction with CVS Health,” said Shawn M. Guertin, Aetna executive vice president and CFO in the latest earnings statement. “With our extensive integration planning process now set to shift to an implementation phase, I am confident the combined company is well positioned to begin the next stage of our journey.”

Centene’s managed care membership grows by 16 percent, revenues increase 36 percent

Centene has experienced a highly profitable third quarter due to a managed care membership increase of 16 percent since 2017.  The company’s managed care revenues grew by 36 percent.

Centene now covers 14.2 million managed care members. Revenues grew from 11.9 billion in 2017 to $16.2 billion in 2018. The payer’s net income for Q3 of 2018 was $375 million after accounting for claims and operating expenses.

Centene also experienced financial success in the Medicare Advantage segment. The payer earned $1.3 billion in total Medicare revenues.  Centene attributed strong Medicare performance to enrollment growth and high-quality MA plans. The payer’s MA plan earned a four-star rating from CMS for 2019.

Medical loss ratios also improved even though Centene enrolled a substantial number of high-risk individuals during 2018. MLRs decreased from 88 percent in 2017 to 86 percent in 2018 as high-risk membership reached 11.3 million members.

“The Company continues to execute on its growth strategy. The operating metrics were strong, excluding some offsetting adjustments associated with expired contracts,” said Michael F. Neidorff, Chairman and CEO. “Overall, we are very pleased with the results and have good momentum heading into the fourth quarter and 2019.”

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