COVID-19 costs, care deferrals came back to bite insurers in Q4 2020

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Mounting costs related to COVID-19 caught up with insurers in the fourth quarter of 2020. (Getty/monsitj)

While health plans reported sky-high profits in the early parts of 2020 due to care deferred under the pandemic, rising costs related to COVID-19 and more stable care utilization dinged their finances in the fourth quarter.

Cigna was the most profitable of the major national insurers in the fourth quarter, bringing in $4.1 billion in earnings for the quarter. 

While those profit numbers fell short of the expectations of Zack's analysts, Cigna's profits far outpaced its competitors in the quarter. In second place was UnitedHealth Group, with $2.2 billion in profits.

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CVS Health earned $973 million in profits for the fourth quarter, and Anthem brought in $551 million.

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Humana and Centene Corporation, meanwhile, both reported losses in the fourth quarter, with Centene posting a $12 million loss and Humana reporting $274 million in losses.

Through much of 2020, payers warned that they would feel the impacts of the coronavirus pandemic in the latter half of the year. Across the board, the companies said they saw spikes in costs related to COVID-19, and those costs were not offset as care utilization ticked up in tandem.

Cigna's chief financial officer Brian Evanko said, for example, that in the second quarter care deferrals largely offset costs related to the pandemic. In the third quarter, COVID-19 costs were on par with savings from lower care use, he said.

By the fourth quarter, COVID-19-related costs had outpaced any savings from deferred care, Evanko said.

Humana executives told investors that the insurer saw notable increases in COVID-19 hospitalizations across almost all of its markets. While care use was down about 15% in the quarter, that was not enough to offset the spike in COVID-19 costs.

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Humana warned executives back in the third quarter that a loss was likely looming as COVID-19 cases mounted.

Anthem, CVS, Centene and UnitedHealth all cited similar concerns in their fourth-quarter reports.

Despite the challenges in the quarter, though, these payers were all profitable for full-year 2020, according to the reports. UnitedHealth Group led the way in 2020 profits, bringing in $15.4 billion.

Cigna brought in $8.5 billion in profit for 2020, with CVS close behind at $7.2 billion. Anthem earned $4.6 billion in profit for the year, followed by Humana with $3.4 billion and Centene with $1.8 billion.

A common boost? Medicare Advantage. 2020 marked a significant year of growth for many payers in the space, and they're planning to continue that expansion in 2021.

Anthem, for example, said its Medicare Advantage membership was up 18% in 2020. UnitedHealthcare expects to add 900,000 new Medicare members this year across individual, group and dual special needs coverage, executives told investors.

Centene's acquisition of WellCare, which was finalized in early 2020, also grows its reach in Medicare Advantage significantly.

And while CVS' Aetna subsidiary is planning further Medicare Advantage expansion, much like its peers, executives said it's also eyeing a reentry into the Affordable Care Act exchange market beginning in 2022. Aetna fully exited the exchanges in 2018 amid mounting losses.