Payer Third Quarter Earnings Results Spotlight COVID-19 Impact

November 10, 2021 - Payer third quarter earnings results indicated that the coronavirus pandemic had varying effects on major payers in 2021.

For some payers, higher than expected levels of deferred care led to revenue growth, while others experienced continued declines in enrollment. Overall, however, coronavirus testing and treatment due to the Delta variant surge are expected to offset these losses.

Earlier in the quarter, UnitedHealthcare released its third quarter earnings, sharing its experience with many of the same trends. At the time, John Rex, executive vice president and chief financial officer at UnitedHealth Group, found that the current patterns still mimic 2020 behaviors.

Aetna, Anthem, and Humana shared how the Delta variant surge and deferred care impacted their outcomes in the third quarter of 2021.

Aetna

CVS Health Aetna’s revenue as of September 30, 2021 rose 9.5 percent compared to the primary year. The payer’s medical loss ratio reached 85.5 percent, largely due to coronavirus-related expenditures.

READ MORE: Coronavirus Pandemic’s Impact on Insurer, Consumer Trends in 2021

The payer’s non-COVID costs have actualized within the company’s expectations, Karen Lynch, president and chief executive officer and director of CVS Health Corp, confirmed in the earnings call.

Aetna attributed its revenue growth to a growth in government services. Revenue from government services, particularly in the commercial segment, boosted the payer’s adjusted operating income by 2.4 percent. The government services business experienced an income boost due to a rise in coronavirus testing and treatment that was offset by deferred care.

Coronavirus utilization was also a major factor in Aetna’s revenue growth. The higher medical loss ratio increase was due to coronavirus utilization patterns. The payer expected deferred care to continue into the fourth quarter of 2021, but not at the same level as in the third quarter.

The repeal of the health insurance fee also offset some of the gains that the company saw.

Aetna’s enrollment grew across its commercial, Medicaid, and Medicare lines of business. In Medicare Advantage, enrollment grew 9.5 percent over the payer’s 2020 gains and the payer projected double-digit gains in 2022. Aetna’s commercial segment sales increased by 50 percent compared to 2020 and the payer’s client retention rate in that segment is 95 percent.

READ MORE: How Employer Health Benefits Are Changing Due to Coronavirus

Looking to the future, Lynch stressed three core parts to the payer’s strategy.

“If you think about our overall care strategy, it's virtual care, it's in the community, and it's in the home,” Lynch told investors.

Anthem

Anthem’s operating revenue grew by 16 percent over its 2020 third quarter, hitting $35.5 billion. The payer’s total enrollment grew by 2.4 million members, compared to the same quarter last year to reach 45.1 billion members.

Anthem’s higher revenue was the result of higher premium income. As the payer’s Medicare and Medicaid membership expanded by 2.3 million lives collectively, so did its premium revenue. 

Additionally, the payer saw revenue growth through IngenioRx. The pharmacy product experienced a revenue bump of 29 percent compared to the third quarter of 2020, jumping from $345 million to $445 million. Anthem attributed this increase to the product’s growing enrollment through integrated medical and pharmacy healthcare benefits.

READ MORE: Top Payer Strategies for Overcoming Coronavirus Vaccine Hesitancy

“Our deep connection to the communities we serve, commitment to advancing a digital platform for health and our differentiated approach to addressing the whole health of the people we serve has underpinned our strong performance despite the challenging environment due to COVID,” said Gail Boudreaux, president and chief executive officer of Anthem. 

“The strong growth we saw across all of our benefits business in the third quarter demonstrates that our core offerings, as well as additional innovative products and services continue to resonate in the market. We believe the momentum we are seeing and our ability to deliver on our strategy will be further accelerated by recent changes in our leadership.”

Humana

Humana’s revenue totaled $20.7 billion, an increase of three percent over its third quarter 2020 results, according to the earnings release.

Humana now expects its Medicare Advantage population to be 11.4 percent higher than it was in 2020, growing to a total of 450,000 members. 

Important factors that influenced Humana’s revenue were the Kindred at Home acquisition and the ripple effects of deferred care.

With the acquisition of Kindred at Home, Humana is now the biggest home healthcare and hospice organization, Bruce Broussard, president, chief executive officer and director of Humana, shared in the earnings call. Humana plans to integrate Kindred at Home into its payer-agnostic home healthcare offerings.

Broussard acknowledged the current workforce shortage in home healthcare, which is stunting the payer’s ability to grow in some markets. He expected that the payer’s CenterWell brand as well as enhanced benefits will support recruiting efforts.

Non-coronavirus Medicare Advantage utilization has been lower in the second half of 2021 than Humana anticipated. In the second quarter, the payer projected that utilization would be 2.5 percent below typical levels, but by the third quarter earnings call that projection had dropped to 5.5 percent below typical levels. 

However, coronavirus costs should offset those declines, leaving the final utilization rate at 2.5 percent lower than baseline. The Delta variant is the main driver behind the increased coronavirus utilization.

Humana saw bigger gains in Medicaid enrollment than initially projected and now expects between 125,000 and 150,000 new enrollees.

But Humana’s group and specialty segments continue to suffer, perpetuating enrollment losses from 2020. Fully-insured medical claims for coronavirus treatment were greater than expected. The payer upped its projected membership losses from 100,000 members to 125,000 members, due to rating actions related to the coronavirus pandemic’s expected influence in 2022.

“Our guidance as of the second quarter did not contemplate significant COVID costs in the back half of the year, and the commercial business is not seeing the same level of utilization offset experienced in Medicare Advantage,” reminded Susan Diamond, chief financial officer at Humana.

Payers projected that 2022 would see care utilization return to normal, but 2021 has already demonstrated that the future remains uncertain.