US managed care insurers' second-quarter earnings season was characterized by generally higher year-over-year results even amid ongoing woes related to Medicaid redeterminations.

Many of the top publicly traded US managed care insurers saw growth in year-over-year earnings, a result in line with analyst expectations of a strong second quarter for the sector. However, earnings were adversely impacted by Medicaid redeterminations nearly a year after the long-delayed process restarted, which in some cases sent membership figures tumbling.

Redetermination impacts felt

Redetermination — the process of states deciding who qualifies for government subsidized healthcare — was delayed for years amid the worst of the COVID-19 pandemic. After resuming in spring 2023, the impacts on managed care insurers became clearer nearly a year as most states neared the end of the complicated, varied process.

Elevance Health Inc.'s second-quarter revenue dropped to $43.22 billion, from $43.38 billion in the year-ago quarter, still an increase from the $42.27 billion posted in the first quarter. The revenue drop was due in part to Medicaid membership attrition, which CEO Gail Boudreaux attributed to procedural disenrollments amid redeterminations.

"We expect disenrolled members to enroll throughout the year, albeit on a longer lag than expected when redeterminations resumed last year," Boudreaux said during a July earnings call. "We are seeing the percentage of returners steadily increase, especially in our blue states where we offer both commercial and Medicaid health plans."

However, GAAP net income improved year over year, growing to $9.85 per share in the second quarter from $7.79 per share in the second quarter of 2023.

Fellow managed care insurers Centene Corp. and Molina Healthcare, Inc. reported similar redetermination woes as well as shifting costs related to the higher relative acuity of remaining Medicaid membership. Molina's earnings per share fell to $5.17 per share in the second quarter of 2024 from $5.35 per share in 2023.

Rising costs do not raise all ships

Rising medical costs have been an ongoing issue in recent quarters, most notably surrounding Medicare Advantage plans, which are federally subsidized plans aimed at seniors and those with certain disabilities.

Humana Inc., which was hit particularly hard by a high medical loss ratio at the end of 2023, continued to face cost pressures and lowered its EPS projections for full year 2024 to $12.81 from $13.93 while raising its forecast for Medicare member growth to 4%. Year over year, Humana's second-quarter EPS dropped to $5.62 in the second quarter of 2024 from $7.66 in the previous year.

Redeterminations and higher costs for the elderly also come during a time of heightened scrutiny on the small number of massive US managed care insurers.

UnitedHealth's cyber hit, pharmacy benefit managers

UnitedHealth Group Inc., which is reportedly facing an investigation from the US Justice Department, continued to feel the impacts of a February cyberattack on its Change Healthcare Inc. subsidiary.

The cyberattack hurt the company's medical care ratio, which was impacted by about 40 basis points, or $290 million, due to the suspension of some care management activities after the attack, according to CFO John Rex. UnitedHealth's medical care ratio in the quarter was also "modestly affected by three other factors," Rex said during a second-quarter earnings call, including member mix within Medicare Advantage and dual special needs plans.

In recent years, pharmacy benefit managers (PBMs) have been the target of bipartisan reform efforts to limit the influence of the middlemen that have been accused of driving up the cost of prescription drugs. One of the most high-profile bills, the Pharmacy Benefit Manager Transparency Act of 2023, has seen little movement since it was introduced to the US Senate in January 2023 by Sen. Maria Cantwell (D-Wash.).

While legislative changes have largely stalled, during an earnings call The Cigna Group CEO David Cordani defended PBMs while acknowledging the existence of some "pain points."

Among those pain points are the 1% of patients in the United States in 2023 who experienced out-of-pocket costs above $2,000, Cordani said.

"From our point of view, that's too many," Cordani said. "We accept the responsibility to accelerate innovation to make medications more affordable while continuing to improve health outcomes in finding solutions for every person we serve."

If PBM scrutiny is causing trouble, it has yet to impact Cigna's earnings. The insurer posted second-quarter adjusted income from operations of $1.91 billion, or $6.72 per share, according to an earnings release, up from $1.82 billion, or $6.13 per share, in the prior-year period.