Medicare Advantage headwinds didn't prevent payers from turning a profit in 2023

Though a spike in utilization among seniors slammed payers last year, particularly in the fourth quarter, each of the six major national firms turned a profit in 2023.

Leading the way, as per the norm, was UnitedHealth Group, which brought in $22.4 billion in profit for the year. Its closest rival, CVS Health, earned $8.3 billion in 2023 profit, according to a Fierce Healthcare review of quarterly earnings reports.

Both of these firms represent major players in Medicare Advantage (MA): UnitedHealthcare and Aetna, respectively. And both felt the impacts of the higher-than-expected care use in the back half of the year, with CVS cutting its outlook for 2024 to compensate.

Humana, another of the largest MA plans in the country, was the most acutely effected by the utilization increase, given that the bulk of its insurance business is in the Medicare space. While it was profitable for the year, posting $2.5 billion, it reported a $541 million loss in the fourth quarter and set conservative guidance for 2024 amid "greater inherent uncertainty" in MA.

The story was similar for Centene, which also hosted its earnings call after the Centers for Medicare & Medicaid Services released its proposed Advance Notice for MA in 2025. CEO Sarah London also warned that the rate notice was "insufficient" given significant changes to the program, including an overhaul of risk adjustment audits.

Centene reported $2.7 billion in profit for 2023.

Meanwhile, payers with less of a stake in MA were, perhaps unsurprisingly, less effected. Elevance Health executives said utilization was largely in line with the company's expectations. Cigna, which is planning to sell off its MA plans to Health Care Service Corporation, was also in a strong position to manage those costs.

Elevance Health earned nearly $6 billion in profit for 2023, and Cigna posted $5.1 billion in 2023 earnings.

Analysts at Fitch Ratings and Moody's Investors Service both noted, though, that major insurers are positioned to weather these challenges in the long term even as they feel the pain now. Fitch analysts said earlier this week that they expect both the spike in MA utilization and the potential rate cuts to be credit neutral.

Moody's categorized the health insurance sector as stable in a Thursday report, though the analysts did acknowledge pressures in MA as well as other headwinds around Medicaid redeterminations.

"Entering 2024, Medicare Advantage has a greater level of uncertainty than last year," they wrote. "The spike in utilization trends that MA experienced during 2023 will likely persist in 2024."

"Prudent underwriters of MA may have adjusted for this trend in setting 2024 pricing, but the question is how much of these higher utilization costs will be covered by higher rates," the analysts said.

Moody's also released a report earlier in the quarter noting that profitability in MA, which has been a key growth target in the payer space over the past decade, may be waning. So all eyes will be on the program when first-quarter results start to roll in this spring.

Beyond profitability, each of the six companies Fierce analyzed grew their revenue year over year in 2023. UnitedHealth again led the charge, reporting $371.6 billion in 2023 revenue. That's up from $324.2 billion in 2022.

And UHG does not expect to slow down on growing, with the company expecting to reach at least $400 billion in revenue this year.

CVS Health had the next highest revenue, bringing in $357.8 billion compared to $322.5 billion in 2022. Cigna is on the cusp of topping $200 billion in revenue, posting $195 billion in revenue for 2023. In 2022, Cigna reported $180.5 billion in revenue.

Elevance Health lands in fourth place on 2023 revenue, reporting $170.2 billion. That figure grew from the $155.7 billion that the company brought in during 2022. Centene, meanwhile, is close behind with $154 billion in revenue for 2023, up from $144.5 billion in 2022.

Humana's revenue topped $100 billion in 2023, landing at $106.3 billion. By comparison, Humana's 2022 revenue was $92.9 billion.