Latest Earnings Reports Show State of Health Payers in 2017
A health payer can either make or break its profitability goals based on how well it incorporates value-based care and addresses common financial challenges.
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By - At the half-year mark, payers have a good sense of how well their efforts to promote value-based care have fared and the opportunity to make the necessary adjusts where they have not.
As part of the business-facing side of value-based care, payers must stand out through effective marketing, extensive consumer choice, transparent pricing, consumer growth and retention, and other methods that drive payer profitability.
Based on second quarter earnings reports, large and mid-size payer organizations that succeeded in these categories saw sizeable revenue jumps, increases in operational efficiency, enrollment growth, and related positive business metrics. Other payers noted where improvements were needed.
Cigna offered a variety of consumer-centric healthcare choices for substantial profit growth
The payer saw its bottom line increase 49 percent from Q2 of last year and revenues increase by 4 percent to $10.3 billion in the second quarter of 2017, attributing growth to its consumer healthcare options.
“Our strong second quarter results and significant growth across our diversified portfolio of businesses demonstrate the focused execution of our strategy,” said President & CEO David M. Cordani. “We continue to drive differentiated value for our customers, clients and partners, and innovate in a rapidly changing and dynamic environment.”
Cigna’s most profitable consumer business segments were in Global Health Care and Global Supplemental Benefits segments.
The first segment is an offering of specialty health care products and services to domestic and multinational clients and customers using guaranteed cost, retrospectively experience-rated funding arrangements, and administrative services only (ASO) funding arrangements.
Cigna’s other segment includes its global individual supplemental health, life, and accident insurance business, as well as Medicare supplement coverage in the United States.
“Global Supplemental Benefits results continue to reflect the value created by affordable and personalized solutions delivered directly to individual consumers through a diversified set of distribution channels,” the company announced alongside its announcement of Q2 earnings.
Molina Healthcare $230 million losses result from operational inefficiency
On the other end of the spectrum, Molina Healthcare recorded net losses of $230 million and communicated to investors efforts to implement a restructuring plan for the remainder of the year.
“We are disappointed with our bottom-line results for this quarter and have taken aggressive and urgent steps to substantially improve our financial performance going forward,” said interim President & CEO and CFO Joseph White.
“Following a thorough review of our business operations,” he continued, “we have begun to implement a company-wide restructuring plan that we expect will reduce annualized run-rate expenses by between $300 million and $400 million by late 2018 when fully implemented, with approximately $200 million of these run-rate reductions expected to be achieved by the end of 2017 and in time for full realization in 2018.”
The company cited over spending on expected medical care costs, federal marketplace performance in certain states, and poor financial performance overall from health plans in New Mexico, Florida, Illinois, and Puerto Rico as its key missteps.
White said that the company has been over-involved in top-line business performance, and needs to dedicate more resources to manage operational efficiency.
“In the past, we have been focused on top line growth, often at the expense of bottom line results,” he explained. “While we expect to enjoy continued RFP and organic growth in our Medicaid managed care business, we are now intensively focused on improved operating performance and efficiency as the path to greater profitability and shareholder returns.”
Aetna’s pricing strategy and enrollment growth led to 3 percent profit increases
Based on profit increases in the second quarter, Aetna expects to improve bottom-line results in 2017 overall and credited results to effective enrollment growth.
Aetna’s second-quarter performance resulted in net income of $822 million, and adjusted earnings of $2.1 billion for the six months ending on June 30, 2017.
“Our strong second quarter results speak to our continued focus on disciplined pricing and execution of our targeted growth strategy,” said Chairman & CEO Mark T. Bertolini. “Based on our continued outperformance, we are once again increasing our full-year 2017 earnings projections.”
The payer reported that company investments in their Health Care segment and lower membership targeting and offerings in ACA-compliant private insurance helped to grow its most profitable health plans. Using the results from the second quarter, Aetna expects targeted growth investments to accelerate throughout 2017.
“Our core businesses continued to outperform during the second quarter, carrying forward positive momentum from the start of the year,” said Executive Vice President & CFO Shawn M. Guertin. “Additional 2017 earnings power allows us to improve our full-year outlook while also accelerating our timeline for targeted investments in growth initiatives.”
Centene succeeds in Federal Marketplace profit through effective strategy
The Centene Corporation, a payer based in of St. Louis that focuses on vulnerable and uninsured individuals, experienced revenue growths of 10 percent over their second quarter in 2016.
Revenue growths were attributed to an increase of 12.2 million in managed care membership, an addition of 788,300 members (7 percent) compared to the second quarter of 2016.
The payer also cited that a decrease in the cost of Medicare and Medicaid business expansions is expected to continue revenue growth, since they mostly cover beneficiaries under Medicaid, CHIP, Medicaid ABD, Medicaid Long Term Care (LTC), state-sponsored/hybrid programs (Special Needs Plans), and Medicare.
Centene’s second quarter results are indicative of the growing value of Medicaid, and how satisfied beneficiaries can be with federally-provided insurance.
"We are pleased with the strong second quarter performance across our product lines. The Marketplace business continues to be particularly strong, confirming our business as usual approach,” said Chairman and CEO Michael F. Neidorff.
