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Our Take: Insurers report billions in profit, gains in Medicare Advantage enrollment

Feb 17, 2020
Most of the major payers have released their full-year financial results for last year, and a few stand out as particularly noteworthy.


Let’s start with CVS Health, who reported $6.6 billion in profit in 2019 — that compares with a loss of $596 million the year before. 2019 was the first year in which CVS-Aetna reported financial results as a combined company. That accounted for much of the increase in profits, although a lower-than-anticipated tax rate helped. Total revenue was up 32%, at $256.8 billion.


As expected, the Aetna acquisition substantially increased CVS’ health care benefits segment, almost tripling revenue in the fourth quarter relative to the same period in 2018 ($17.2 billion vs. $6.2 billion, respectively) and resulting in a staggering 677% increase in revenue year over year ($69.6 billion vs. $9 billion).


Kaiser Permanente nearly tripled its profits last year, reporting net income of $7.4 billion in 2019 compared with $2.5 billion a year earlier. The not-for-profit organization attributed nearly two-thirds of those gains ($4.7 billion) to “the strong investment markets.”


“Our financial results allow us to make capital investments, deploy new technologies, and drive affordability for our members,” said Kathy Lancaster, Kaiser Permanente’s chief financial officer.


Molina Healthcare’s financial results were interesting as well, though not because the company reported huge profits. In fact, its net income for the year was only slightly higher than in 2018 ($737 million vs. $707 million).


What’s compelling is Molina’s perspective on its Affordable Care Act (ACA) marketplace business. Last fall, Molina reduced its marketplace prices by an average of 4% in an effort to grow its 2020 membership, according to Healthcare Dive. The reduction didn’t work — at least not as much as the company had hoped. 


But CEO Joseph Zubretsky noted that while consumers weren’t as willing to switch plans for relatively modest premium savings as they were in previous years, the flip side is that retention rates are higher. He said the marketplace segment produced exceptional margins for Molina in 2019, Healthcare Dive reported, and the company expects 9.2% growth in revenue for the segment in 2020. Zubretsky remarked that members who were staying with their ACA plans longer were probably more chronic and heavy users of health care services. 


Many payers also saw significant increases in their Medicare Advantage (MA) enrollment. For example, CVS Health’s MA business increased more than three times the industry average last year, according to CEO Larry Merlo. The company’s MA membership was at 2.3 million at the end of 2019, an increase from the previous year of 32%. Humana had a 17% increase in MA enrollment (to 3.6 million members at year-end), the largest jump Humana has had in more than a decade, and UnitedHealthcare said its MA enrollment in the fourth quarter was the “strongest ever” (with 5.3 million members in MA plans at year-end).


Incidentally, UnitedHealth Group reported profit of $13.8 billion for 2019, up 15.5% from a year earlier.


Our Take:
A study just released by the Health Care Cost Institute (HCCI) revealed that the average annual health care spending for individuals with employer-sponsored coverage rose to all-time high in 2018, to $5,892 per person. Most of the increase was due to higher prices for medical services, but the institute said there was also “an uptick in utilization for the first time in several years.”


Oh, the irony that the HCCI study was released during earnings week.


No matter what your views are on our health care system, you have to agree that there’s a problem when the country’s largest insurers are racking up billions of dollars in profit while health care spending just keeps going up and up and up.


Let’s be clear. No one begrudges a business for making a profit. HCA, for example, posted an 8.1% net margin on $46.7 billion in revenue in 2018. Investors have rewarded the nation’s largest for-profit hospital operator: from Dec. 31, 2013 to Dec. 31, 2018, its share price climbed 160%. HCA, by the way, is known for running efficient facilities that provide high-quality care. Bravo.


Still, we can’t help but wonder how much of the reported “data” vilifying universal health care is being generated by the insurance industry and its lobbyists. We’ve certainly heard plenty of ominous warnings from CEOs of some of the largest insurers about the inherent pitfalls of a single-payer system, and why such a system could never work in the U.S.


We admit that they may have some valid points. But let’s be honest — look what these companies stand to lose.


We don’t pretend to know what the best solution is to ever-escalating costs, or how best to fix the myriad of problems in our health care system. We do try to address these issues, however modestly, in our Health Care Rounds podcast. We’ve had several guests this season already that have interesting solutions to offer, including former Permanente Medical Group CEO Dr. Robert Pearl; former VA Secretary Dr. David Shulkin; and Intermountain’s Chief Physician Executive Dr. Mark Briesacher.


If you haven’t yet done so, take some time and listen to what they have to say. You can find Health Care Rounds wherever you get your podcasts.


What else you need to know
In CMS’ recently proposed rule for Medicare Advantage and Part D plans, the agency is seeking to add a second “preferred” tier for specialty drugs for Part D plans, starting Jan. 1, 2021. Presently, all specialty drugs covered by Part D plans are in one tier, at the same cost-sharing level. Drugs in the added tier would have a lower cost-sharing amount for beneficiaries. The intent, according to CMS, is to give Part D plans more flexibility to negotiate with drugmakers. The proposed rule would also require Part D plans to offer enrollees a real-time benefit tool, starting in 2022, that would provide direct price comparisons for formulary options as well as cost-sharing information. Patients could use the tool during medical appointments to see their out-of-pocket costs for prescription drugs and discuss alternatives if costs are too high.


Separately, CMS has finalized a survey for hospitals participating in the 340B drug-pricing program that will collect information on the hospitals’ drug acquisition costs. The survey is in response to a court ruling that found CMS did not have authority to lower the program’s payment rates, which it tried to do in 2018, because the agency had not gathered sufficient data on the drug acquisition costs to justify the rate cuts. Public comments are being accepted on the proposed rule mentioned above through March 6 and on the survey through March 9.


Eisai is pulling weight-loss drugs Belviq (lorcaserin) and Belviq XR from the market. The FDA asked Eisai to withdraw the drugs based on results of a five-year postmarketing study that showed increased rates of pancreatic, colorectal, and lung cancer in people taking the drugs (7.7% vs. 7.1% in the placebo group, for all malignancies combined; approximately 12,000 participants in the trial). In a press statement, Eisai said its interpretation of the trial data “differs from that of the FDA” and the company still believes the benefits of the drugs outweigh the risks for the indicated population. The FDA is advising that people should stop taking the drugs and talk with their physician about an alternative.


AdventHealth is switching from Cerner to Epic for its electronic health record (EHR) and revenue cycle management systems. Based in Altamonte Springs, Fla., and one of the largest faith-based health systems in the U.S., AdventHealth said it would implement an integrated Epic system across all of its care settings and would use Epic’s Community Connect program to extend the EHR system to affiliated providers in the communities the health system serves. The transition will start in March, and AdventHealth anticipates that it will take about three years to complete.


Executive Moves:
Four of Sanofi’s senior executives have been dismissed as new CEO Paul Hudson follows through with his plan to simplify the company’s management team, FiercePharma reported. Those who were given notice are Ameet Nathwani, chief medical officer and chief digital officer; Dieter Weinand, executive vice president (EVP) of primary care; Dominique Carouge, EVP of business transformation; and Kathleen Tregoning, EVP of external affairs.


Cigna appointed Dave Queller as the new president of Express Scripts. He will head up pharmacy benefit management services, along with overseeing supply chain and drug procurement.


Michael Young is the new CEO of Temple University Health System, taking over for acting CEO Stuart McLean, who stepped in when Dr. Larry Kaiser left in September. Young retains his roles as president and CEO of Temple University Hospital, according to the announcement.


Walgreens also has a new president: Richard Ashworth. A Feb. 5 press release issued by parent company Walgreens Boots Alliance (WBA) said Ashworth has been with the company for 28 years. He succeeds Alex Gourlay, who was Walgreens’ president since 2014; Gourlay is WBA’s co-chief operating officer.


Leadership is shifting at Horizon Blue Cross Blue Shield of New Jersey as well. Effective April 6, Kevin Conlin, the company’s chairman, president, and CEO, will become executive chairman of the board, according to a press statement, and Gary St. Hilaire will take on the roles of president and CEO. St. Hilaire will also become a member of the board of directors at that time.




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