EBITDA and Medicaid growth, commercial loses, higher medical loss ratios (MLR), and consolidation and subsidy doubts marked the quarter.
Moody's Investor Service has reported first quarter (Q1) 2022 earnings for the seven publicly traded health insurers that are included in its ratings. The result was on overall stable outlook for 2022 based in part on lower projected COVID-19 costs, better insurer credit strength, and continued Medicare Advantage (MA) growth—despite inflationary threats and the war in Ukraine.
The status of these events, as well as the public health emergency, will determine much across commercial, Medicaid, and MA markets as the year progresses.
- Growth: 3.7% average EBITDA
Moody's notes that while "enrollment growth was partly offset by increased medical costs, reflecting Omicron and increasing non-COVID utilization," EBITDA growth was actually higher (10.3%) when investment gains and market-based gains/losses are excluded.
Among the seven publicly traded plans that Moody's rates, EBIDTA ranged from losses by Aetna and Cigna (down 2.7% and 2%, respectively) to 8.6%-9.8% growth from most of the remaining insurers—Anthem, Centene, Humana, and Molina. UnitedHealthcare Group's EBITDA growth was at 3%.
Projections: Continued 2022 growth in the low double-digits, with the observation that "the growing diversification of the industry with the increasing investment in unregulated health services has boosted companies' credit strength, despite incrementally higher leverage."
- Growth: Medicaid and Medicare Advantage enrollment up
On historical trend, economic downturns continue to benefit Medicaid enrollment. Membership was up 23% year-over-year (YOY). Also on trend, MA continues its enrollment growth with a YOY increase of 13.2%. Organic age-in factors were aided by increasingly intense competitive practices.
Projections: For Medicaid, 4 million disenrollments after redeterminations—approximately 10% of the population—would make the largest Medicaid plans, Centene, and Molina the most vulnerable. For MA, Moody's notes: "As competition heats up, our rated companies will have to be more focused on the trade-off between margin and growth."
- Loss: Medicaid's gains are commercial's losses
The pandemic has helped redistribute enrollment to Medicaid from commercial rolls, which were down 3.4% Q1 2022 and 1% YOY.
Projections: Expect declines in Medicaid enrollment but the fate of extended marketplace subsidies will determine growth shifts to commercial markets.
- Loss: MLR increase averaged 84.8%
Pandemic costs, including hospitalization spikes due to Omicron, continue to bear the blame, although these are trending down.
Projections: Moderate COVID-19 costs should be countered by utilization from deferred care. Related to the latter, however, Moody's notes that cost uptick fears "have yet to materialize in a significant way, although this remains a risk."
- Uncertainty: Subsidy expirations would turn gains into losses
Moody's notes that marketplace enrollment reached a record 14.5 million, up 2.5 million from 2021.
Projections: "Without new legislation to extend these subsidies, we expect much of the enrollment gains to reverse."
- Uncertainty: More M&A scrutiny
The blocking of UnitedHealthcare's acquisition of Change Healthcare could be the first of many Department of Justice actions that limit M&A in 2022.
Projections: Moody's notes consolidations pros and cons, its capacity to grow capabilities and reduce costs, but its negative impact on leverage.
Laura Beerman is a contributing writer for HealthLeaders.