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Medicare Advantage, Premium Revenues Drive Q1 Payer Profits

Reports from the first quarter of 2018 indicate that Medicare Advantage health plans and high premiums drove increases in profits for payers.

2018 quarterly reports show Medicare Advantage and high premium revenues helped profits.

Source: Thinkstock

By Thomas Beaton

- Healthcare payers experienced strong first quarter profits in 2018 because of sharp growth in Medicare Advantage (MA) enrollment and premium revenues, according to newly released earnings statements.

The reports confirm the stability and profitability of the Medicare Advantage market, which has developed into a $187 billion segment. Payers also noted strong returns on premiums, citing increased rates and efficient healthcare spending as primary drivers.

Larger commercial payers in general struggled with the sale of individual health plan products and experienced some membership decreases. However, payers with specialized plan offerings in Medicaid and individual markets noted positive revenue gains and steady enrollment.

UnitedHealth Group earnings grew by 13.3 percent year-over-year to total $55.2 billion

UnitedHealth Group’s first quarter earnings statement reveals that the company earned $4.1 billion at the start of 2018. Between 2017 and 2018, the company earned total revenue of $55.2 billion.

The payer cited profit increases in the employer-sponsored and commercial markets, even though fewer people enrolled in these plans.

UnitedHealthcare Employer and Individual health plan membership declined by 195,000 members as employers shifted retirees from its health plans to group MA plans.

Revenues in the retirement market, including Medicare and Medicare Advantage, grew by $2.4 billion in the first three months of 2018, contributing significantly to overall revenue increases.

UnitedHealth Group served 330,000 more Medicare Advantage beneficiaries through individual and group retiree plans, an increase of 10.6 percent over 2017.

Optum, UnitedHealth’s consumer engagement and analytics division, also experienced noticeable improvements in revenue by earning $23.6 billion between 2017 and 2018.

Digital consumer engagement offerings, payer technology expansion, technology advisory services, and digital pharmacy services helped generate revenues of a billion dollars or more each.

“Through the intense focus our 285,000 colleagues bring to helping people live healthier lives and helping make the health system work better for everyone, we have grown to serve more people in more ways than ever, including through innovative uses of advanced technologies, data analytics, and modern clinical approaches that improve quality, lower cost and advance consumer and care provider satisfaction,” said UnitedHealth Group CEO David S. Wichmann.

Centene’s success in individual health plan, Medicaid markets led to 13 percent growth in revenue

Centene earned $13.2 billion in revenue during the first quarter of 2018, which represented a 13 percent increase over the same time last year.

The payer highlighted strong growth in managed Medicaid membership as a leading factor in revenue. Centene’s managed Medicaid population grew to 12.8 million members, increasing by 684,000 since March 2017.

Centene also attributed financial performance improvements to the acquisitions of various healthcare providers to streamline care for individual health plan, Medicaid, and Medicare Advantage plan members.

Individual health plan revenues increased three percent over 2017 results because of enrollment growth. Increases were mildly offset by $700 million in revenue associated with pass through funding from the California state government.

In addition, Centene reported a medical benefits ratio (MBR) of 84.4 percent in the first quarter of 2018, indicating a 13.6 percent profit on premium revenues. Centene’s MBR was 87.6 percent in the first quarter of 2017.

“Our strong first quarter results set the stage for Centene to maintain positive operating and financial momentum throughout 2018,” Centene Chairman and CEO Michael F. Neidorff said.

Anthem increases net income by 30 percent due to managed spending, smaller ACA footprint

Anthem increased its net income by 30 percent from the prior year even though total plan enrollment declined by 600,000 members.

The payer spent 81.1 percent of premium revenues on medical expenses and suggested that the implementation of value-based care models created steady return on investments even as membership shrank.

“We are pleased with our first quarter 2018 financial performance, which reflects our commitment to strong medical cost performance by effectively leveraging community based innovative and integrated clinical and value-based care models across our markets,” said Gail K. Boudreaux, Anthem President and CEO.

“Throughout 2018, we are prioritizing investments to create a more flexible infrastructure that can quickly respond to the evolving needs of our customers and the changing healthcare environment. We are also driving an increased focus on executional excellence across the organization.”

The largest hit to Anthem’s enrollment totals was a 60 percent decline in individual health plan membership. Anthem now has 700,000 individual plan members, but had nearly 1.8 million members during the same period in 2017. Anthem’s Medicaid enrollment also fell by 120,000 beneficiaries at the start of 2018.

Anthem experienced membership growth in Medicare and Medicare Advantage health plans as 270,000 members and 135,000 members enrolled in these plans, respectively.   

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