The first quarter has passed, and health insurance is still worth paying attention to. Judging from the data of domestic listed insurance companies, the overall growth rate of health insurance is relatively bright. Taking Chinese Insurance and Ping An as examples, from January to March this year, PICC health insurance achieved original premium income of 24.536 billion yuan, a year-on-year increase of 8.2%; Ping An health insurance business achieved cumulative original premium income of 5.273 billion yuan, a year-on-year increase of 10.7%.
In the U.S. health insurance market, several companies have also released data. Among them, Elevance Health's net profit in the first quarter was $2.2 billion, an increase of nearly 13%. As the "first brother" of the industry, United Health did not bring good news, due to the impact of cyber attacks, a loss of $1.4 billion in the first quarter.
Before the first quarter earnings report is released, let's take a look at the 2023 full-year performance of health insurance companies. In summary, in 2023, the overall revenue of the health insurance market will be stable at double-digit growth, and there are two types of profit performance, one is still growing steadily, such as UnitedHealth, Molina Healthcare, etc., the other is affected by rising medical costs, drug litigation costs, etc., which have declined or fluctuated drastically, and the medical cost and medical expense ratio (MLR, the ratio of claims to premiums) has basically remained at 90% The overall growth in the number of members may decrease slightly, among which Mallana is dominated by Medicare Advantage, CVS, Elevance Health and Cigna Business members account for a large proportion, and Centene and Elevance Health have a large proportion of the subsistence business.
Health insurers: UnitedHealth, CVS Health remain strong
Revenue: United Health ranked first in terms of scale and growth rate, and Caesars Medical's growth rate was the lowest
In terms of revenue, companies have performed quite well, with some giants, such as UnitedHealth and CVS Health, expanding their revenue and showing strong growth momentum.
Specifically, in 2023, United Health will rank first with a revenue of $371.622 billion, with a growth rate of 14.64%, showing its leading position in the market and the ability to continue to grow. It should be noted that the company's growth rate is also the highest among all health insurance companies.
This is followed by CVS Health, with revenue of $357.776 billion, a growth rate of 10.9%, although the growth rate is slightly lower than that of United Health, but the scale and growth are also very strong. The company said it was a milestone event that this year's revenue exceeded the $300 billion mark.
Unit: US$ million
Cigna, Elevance Health and Centene Harmana revenue were US$195.265 billion, US$170.29 billion and US$153.99 billion, an increase of 8.17%, 9.35% and 6.54% respectively. Although the growth rate is slightly lower than the top two companies in the industry, it still maintains a steady growth trend, showing competitiveness in the market.
Hamena's revenue reached $106.374 billion, with a growth rate of 14.54%, showing rapid development momentum in the Medicare Advantage market. Kaiser Medical has a similar revenue scale of 100.85 billion US dollars, with a growth rate of 5.7%, which is the lowest among all companies.
As a smaller company, Molina Healthcare's revenue of $34.072 billion is also relatively low at 7.16%, reflecting the challenges they face in the competition, including a small market share.
Net profit: five rises and two drops, Caesar Medical turned losses into profits
In terms of net profit, the performance of each company was mixed. In terms of scale, United Health topped the list with a net profit of $22.381 billion, with a growth rate of 11.44%, showing the company's solid growth in profit, which is in line with revenue figures, indicating its leading position in the market and good profitability.
Unit: US$ million
CVS Health's net profit was $8.368 billion, a 93.39% increase, and the staggering growth rate was due to a low base of $4.327 billion in the same period last year, due to $5.8 billion in opioid litigation costs and a decline in the retail/long-term care segment.
Another company with a similar trend in net profit is Centene, which reached a net profit of $2.702 billion, a growth rate of 124.79%, and the company also had a low base of only $1.202 billion last year, which may be related to the increase in medical expenses, administrative expenses and asset impairment. Caesars Medical turned a profit, with a net profit of $4.122 billion, compared to a loss in the year-ago quarter due to higher operating expenses, which were caused by higher nursing volumes, higher costs of goods and services, and increased labor costs due to fierce competition in the labor market.
In contrast, some companies' net profit performance is not encouraging. Cigna Group's net profit was US$5.164 billion, but the growth rate was -22.97%, indicating that the company is facing certain operational challenges and pressure from declining profits. Hamenna's net profit also declined, with a net profit of $2.484 billion, a decrease of 11.3%, which is estimated to have a lot to do with the increase in medical costs.
Premiums, medical costs, and medical expense ratios: Three companies exceeded US$100 billion in premiums, and five companies exceeded 85% in terms of medical expense ratios
From the perspective of premiums, except for the temporary lack of data from Caesars Medical, among the eight health insurance companies, United Health is still unsurprising, with premium income reaching US$290.827 billion, about twice that of Centene, the second largest in premium scale, which has a premium scale of US$135.636 billion. The size of Hamenna's premiums reached $101.272 billion. These three companies are health insurers with premiums exceeding $100 billion.
Among the remaining health insurers, CVS Health has a premium size of $99.144 billion. Although the company's revenue scale is second only to UnitedHealth, CVS Health itself is a comprehensive medical group with a large layout in pharmacies and clinics, and the health insurance business is an area that has been set foot in after the acquisition of Aetna, so it is not very large compared to other health insurance giants.
Unit: US$ million
Cigna Group's premium size was US$44.237 billion, Elevance Health's premium size was US$35.138 billion, and Molina Healthcare's premium size was US$32.529 billion. Comparatively, these companies have a small premium scale.
From the perspective of the medical expense ratio, all companies are between 80% and 90%, indicating that the operation of the overall health insurance product is in a stable state. Among all companies, Cigna has the lowest medical expense ratio of 81.3%, indicating the company's effectiveness in controlling medical costs.
UnitedHealth's medical expense ratio of 83.2% is also one of the lowest among all companies.
Among the eight insurance companies, five companies have a medical expense ratio of more than 85%, with Molina Healthcare in particular having the highest medical expense ratio of 88.1%, followed by Hamenna with 88%, Centene with 87.7%, and Elevance Health with 87% , reflecting the overall increase in the health insurance market, medical costs relative to premium income, especially for companies with a large proportion of Medicare Advantage in the business of elderly health insurance, such as Halmenna.
Number of members: United Health is unbeatable
In terms of the number of members, among all companies, UnitedHealth still has the largest number of members, reaching 52.75 million, an increase of 2.04% from the end of 2022. This was followed by Elevance Health, which had 46.961 million members, but with a slight decline of 1.2%. These two companies have an absolute advantage in the number of members, far exceeding the others.
Unit: 1,000 people
Among other health insurance companies, Centene has the largest number of members, with 27.47 million, followed by CVS Health, with 25.659 million, an increase of 5.18%, and Cigna Group has 19.78 million members, the largest increase of all companies, with an increase of nearly 10%.
From the perspective of members in specific business lines, in terms of Medicare Advantage products, UnitedHealth still has the most members, with 7.695 million, followed by Hamenna, with 5.9185 million Medicare Advantage members. CVS Health has 3.46 million Medicare Advantage members, while Cigna has only 600,000 Medicare Advantage members, which is why the company recently wanted to sell the business.
In terms of Medicaid products, Centene has the largest number of members, with 14.472 million, followed by Elevance Health, with 10.503 million. Several other companies are comparatively smaller.
In terms of commercial insurance, Elevance Health has the largest number of members, reaching 31.846 million, UnitedHealth's commercial members are 27.31 million, Cigna's business members are 19.179 million, and CVS Health's business members are 18.339 million. Except for Hengqiang, the strong company of United Health, several other companies are mainly business members.
Health insurance is becoming more difficult to operate: premium rates are lower, and medical costs are rising
Overall, there are two major trends among health insurers: lower Medicare Advantage rates and higher healthcare costs.
As a major product in the health insurance market, the operation of Medicare Advantage will be affected by the reduction of policy-side rates. At the end of January 2024, the Centers for Medicare and Medicaid Services (CMS), which oversees Medicare Advantage and other Medicare Health Insurance products, issued a notice about Medicare Advantage rates for 2025, showing an average reduction of 0.2% in base payments.
According to a fact sheet published by the Centers for Medicare & Medicaid Services (CMS), the star change will result in a 0.15 percent decrease in government reimbursement for Medicare Advantage providers, while a risk model revision will result in a 2.45 percent decrease in reimbursement. The Medicare Advantage risk score trend had a 3.86% impact on reimbursements, offsetting a revision of the risk model and a projected decline in star bonuses.
According to the Centers for Medicare and Medicaid Services (CMS), government payments to Medicare Advantage plans are expected to increase by an average of 3.70 percent, or more than $16 billion, from 2024 to 2025.
"CMS continues to ensure that Medicare Advantage and Part D prescription drug programs remain strong, stable and affordable," Medicare & Medicaid Services Administrator Chiquita Brooks-LaSure said in a press release. The notice provides a strong and stable option for those with Medicare, while improving payment accuracy so that taxpayers' money is put to good use. ”
However, executives at large insurers have a different view, expecting lower reimbursement for insurers by CMS. For example, in a Jan. 25 conference call with investors, Hámenna CFO Susan Diamond said the company expects the rate notice to have a negative impact.
In addition, another trend is related to Medicare Advantage products, namely the increase in medical utilization, which is driving up the medical compensation costs of insurance companies. The reason behind the increase in medical utilization is that people who previously postponed medical care due to the epidemic are now resuming medical services, especially the elderly group, although industry insiders have expected this impact to gradually end, but from a practical point of view, insurance companies are still affected by this, especially companies with a large number of Medicare Advantage insured users. Similarly, Khamena released preliminary data ahead of its Q4 earnings report, indicating a medical expense ratio (MLR) of 91.4% versus an expectation of 89.5%. Also affected was UnitedHealth, whose share price fell after the earnings report, also due to higher medical expense ratios (MLRs) in the fourth quarter and for the full year.
In summary, in 2023, the U.S. health insurance market presents diversified performances and challenges. In terms of revenue and net profit, giant companies such as UnitedHealth have shown strong growth, but there are also some companies that are facing a lot of operating pressure, such as CVS Health, which has pulled down profits due to opioid litigation costs, which has led to a sharp plunge in the previous net profit figures. The size of premiums and the number of members vary from company to company, but the overall trend shows the importance and competition for the Medicare Advantage business. In terms of medical costs and medical expense ratio (MLR), companies basically remain within the level specified in the policy, but they have increased compared with other years or quarters, such as UnitedHealth and Harmana.
In summary, factors such as the reduction of Medicare Advantage rates and the increase in medical utilization rates in 2025 have brought certain uncertainties and challenges to the future, but the U.S. health insurance market is still stable and upward. Entering the present, the first quarter has passed, and UnitedHealth and Centene have released quarterly reports. On the basis of 2023, we expect major health insurance companies to have a decent quarterly report and a bright 2024.