Majority of US managed care insurers projected to see revenue growth in Q1 2024

The majority of US health insurers are expected to post year-over-year revenue growth for the first quarter even as nearly half see drops in EPS during the same period, according to an S&P Global Market Intelligence analysis of sell-side analyst forecasts.

Of the nine largest publicly traded US health insurers, all but two are expected to report higher EPS on a sequential basis from the fourth quarter, but only five are expected to log higher EPS year over year, starting off a year still reeling from ongoing Medicaid redeterminations and high Medicare usage. Revenues, however, are largely up year over year, with only two insurers expected to report a decline from the first quarter of 2023.

The majority of the nine largest publicly traded US managed care insurers are expected to see year-over-year and sequential-quarter growth in revenue, with only Centene Corp. and Clover Health Investments Corp. forecast to log both sequential-quarter and year-over-year declines.

Elevance is the sole insurer expected to log lower revenue from the previous quarter but grow year over year.

Medicare disadvantage

Cost trends associated with Medicare Advantage — an expanded version of government-subsidized healthcare aimed a seniors — will be the main focus point for the first quarter, according to J.P. Morgan analysts, although a recent cyberattack on UnitedHealth Group Inc. subsidiary Change Healthcare Inc. "further reduces visibility into what is already limited claims experience at this stage of the year."

"We believe investors remain skeptical about the adequacy of 2024 [Medicare Advantage] bids given persistently higher than anticipated utilization in 2023, and we will be looking to [first-quarter plan year deductibles] to try to assess whether companies have adequately captured utilization trend in 2024 guidance," a research note from the J.P. Morgan analysts reads.

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Managed care insurers are also likely to address the news that government payments to companies running Medicare Advantage programs will be lower than expected in 2025, as the government-subsidized healthcare aimed largely at low-income individuals undergoes post-COVID-19 changes.

The Centers for Medicare and Medicaid Services (CMS) said in a press release April 1 that it established a 3.70% increase in payments in 2025 to insurers that run Medicare Advantage, an expanded version of government-subsidized healthcare available to seniors. The increase will also apply to Medicare Part D prescription drug programs — a voluntary outpatient prescription drug benefit for people with Medicare.

The final increase was 0.16% lower than the 3.86% rate that the CMS published in its advance notice Jan. 31.

Investors had been expecting the final rate to be higher than the advance rate, which had been the case every year since 2021, Piper Sandler analyst Jess Tassan said in a recent interview with S&P Global Market Intelligence.

"Investors were expecting something between a 50- and 125-basis-point [upward] revision to rates between the advanced notice and the final notice and they didn't get it," Tassan said.

Medicare, Medicaid woes continue

Alignment Healthcare Inc., Centene, Humana Inc. and Molina Healthcare Inc. are all expected to log lower EPS year over year.

Humana in particular was hit hard by high Medicare Advantage utilization costs and posted the most dismal fourth-quarter earnings, which sent its stock value plummeting earlier in 2024. The decline came amid a quarter in which the insurer experienced lower-than-expected Medicare Advantage rate increases, which could lead to "meaningful benefit reductions" in 2025, Jefferies analyst David Windley said in a research note.

The only insurer estimated to have no change in their EPS from the fourth quarter is Alignment.

The Cigna Group is expected to be the sole insurer to log lower sequential EPS but higher year-over-year EPS.

Amid ongoing Medicaid redeterminations, Centene is "disappointed" with Texas over the state's scoring of its Medicaid proposal, according to comments made by Sarah M. London during a March conference.

While the scoring results have not been publicly released yet, London said Centene has a "number of concerns" and plans to protest the rating.

"I would say the biggest concern for the program overall is the idea that the results are going to force 1.8 million Medicaid members in Texas, which is a state that has a very high choice rate to choose a different plan," London said.

The first-quarter earnings season will kick off with UnitedHealth's presentation April 16.