Dilok Klaisataporn
As 2023 attracts to an in depth, Moody’s Buyers Service stated in a current report that the full-year outlook for well being insurers stays secure regardless of upcoming challenges from modifications to Medicare Benefit star scores and the GLP-1 class of weight reduction medicine.
Citing a decline in Medicaid memberships because of the resumption of eligibility critiques, Moody’s tasks decrease income development for well being insurers this 12 months although their Q3 earnings met Q2 efficiency and the business’s stability is in step with expectations.
Nevertheless, the agency stated that monetary outcomes throughout the business met its forecasts regardless of sure unexpected headwinds, comparable to a spike in medical utilization amongst Medicare Benefit members.
In June, UnitedHealth (NYSE:UNH), the biggest managed care participant within the Medicare Benefit market, warned that the post-COVID normalization of care utilization amongst seniors would harm its Q2 medical care ratio.
UNH shares, together with these of its major rival within the MA market, Humana (NYSE:HUM), fell in response alongside their friends, Alignment Healthcare (ALHC), Clover Well being (CLOV), and CVS Well being (NYSE:CVS).
Moody’s argues that whereas larger MA utilization continued into Q3, the pattern stabilized however with out an enchancment.
Regardless of a disruption to well being insurers from ongoing Medicaid redeterminations as anticipated, its year-to-date influence has up to now been “comparatively small,” the analysts argued, including that the majority members who misplaced protection are anticipated to enroll in different well being plans.
Throughout the pandemic, a three-year pause in eligibility critiques led to a 32% rise in Medicaid memberships amongst market gamers comparable to Centene (NYSE:CNC), Elevance Well being (ELV), and Molina (MOH).
“As anticipated, that is considerably lowering the earnings growth fee of the well being insurers we fee, however it’s only one in every of a number of drivers of this pattern,” the analysts wrote, including that “we count on that many of the disenrollees will re-enroll within the particular person market or in employer-based insurance coverage.”
Nevertheless, Moody’s expects long-term implications from how Medicare Benefit star scores are calculated. The yearly up to date system categorizes MA plans on a one-to-five performance-based scale, and plans with a ranking of 4 or 5 stars are eligible to obtain bonus funds once they search Medicare reimbursements.
In October, Elevance (ELV) shares fell after disclosing that the share of its MA members in plans with scores of 4 stars or larger had dropped to 34% for the 2024 ranking 12 months from 64% a 12 months in the past.
Different notable tendencies within the business embrace extremely widespread however expensive weight-loss medicine often known as GLP-1 receptor agonists from Novo Nordisk (NVO) and Eli Lilly (LLY).
Moody’s argued that whereas well being insurers can mirror their prices in coverage charges, it is a threat for his or her company purchasers if GLP-1 utilization isn’t managed accurately.
“Well being insurers can embrace these prices in policy prices,” the analysts wrote, including that “nevertheless, for company purchasers who contract with well being insurers for administrative companies solely and in any other case self-insure, the chance is larger, particularly if utilization isn’t successfully managed.”