Insurers’ financial outlook stable despite higher MA utilization: Moody’s

Publicly traded health insurers’ financial results held steady in the third quarter, boosted by strong investment income and membership growth, according to the credit ratings agency.

Article By: Emily Olsen

Blog Source From : https://www.healthcaredive.com/

Dive Brief:

  • Publicly traded health insurers’ financial outlook remains stable despite financial pressures heading into the end of the year, according to a report by Moody’s Investors Service.
  • Payers’ financial results — including those of Aetna, Centene, Cigna, Elevance, Humana, Molina and UnitedHealth — held steady in the third quarter, buoyed by strong net investment income even as utilization increased among Medicare Advantage seniors.
  • Insurers’ earnings were also boosted by membership growth despite Medicaid redeterminations, including improved performance on the Affordable Care Act Exchanges and higher commercial enrollment.

Dive Insight: 

Overall, financial results for the public insurers are in line with Moody’s expectations for the year, though not necessarily for the reasons the credit ratings agency predicted.

Membership growth has held strong, even as states began to check eligibility for Medicaid coverage in the spring after a period of continuous enrollment during the COVID-19 pandemic. Moody’s had estimated the Medicaid unwinding — along with commercial declines due to a potential recession — would hit insurers’ earnings.

But no recession emerged, and the impact from the ongoing redeterminations process has been “relatively small,” the agency said.

Nearly 11 million beneficiaries have been disenrolled from the safety-net program, according to health policy research firm KFF. But about 71% have been removed from coverage due to procedural reasons — meaning they didn’t complete the renewal process, but could be eligible.

Those people could re-enroll in Medicaid if paperwork is completed, Moody’s noted.

“As expected, this is somewhat reducing the earnings growth rate of the health insurers we rate, but it is only one of several drivers of this trend. We expect that most of the disenrollees will re-enroll in the individual market or in employer-based insurance,” analysts wrote. 

Higher utilization in MA, which some insurers began flagging earlier this year, continued in the third quarter. The trend stabilized, but didn’t improve, according to Moody’s — though some insurers have incorporated higher utilization in the population into pricing for next year. 

MA star ratings for 2024 were also released during the quarter, a key financial indicator for insurers as the quality rankings determine whether a plan receives a bonus and its ability to bid against a higher benchmark rate.

Though Moody’s argued star ratings didn’t change much nationally compared with last year, some of its rated insurers saw movement. For example, 87% of Aetna’s members are now in plans that receive four or more stars, compared with 20% in the previous plan year, while Elevance lost ground. Only 35% of Elevance beneficiaries are in the highest rated plans, down from 64%.

Interest in glucagon-like peptide 1 agonists, or GLP-1s, is another trend to follow for insurers, according to the Moody’s report. The medications show promise for weight loss and related health conditions, but the drugs are expensive and must be taken long term to stay effective.

Insurers can include the costs in policy prices, however, companies that self-insure and contract with insurers for administrative services face more risk, especially if they don’t effectively manage use, according to the credit agency.

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