Moody's: 2023 outlook remains stable for payers despite higher MA utilization, Medicaid redeterminations

The financial outlook for major health plans is stable in the face of notable potential headwinds heading into the end of the year, according to a new report from Moody's Investors Service.

The Moody's analysis said earnings in the third quarter were on par with reports from the second quarter and that the industry's stability is in line with expectations. However, the researchers said they were expecting payers to face different challenges as 2023 got underway.

A notable trend that emerged in the second quarter was increased utilization in Medicare Advantage (MA), which peaked in the second quarter thanks to a boost in outpatient care. While the trend did stabilize in the third quarter, "it did not get better," the Moody's analysts wrote.

Centene was the lone exception, and it reported a lower medical loss ratio for MA in the third quarter of 2023 compared to the prior-year quarter, according to the report.

That spike in MA utilization was a trend that the Moody's analysts did not predict at the beginning of the year. However, they were anticipating disruption due to the Medicaid unwinding process, which officially began in April.

The process is nearing the midway point, and, as of November, at least 10 million people have lost coverage. A majority (71%) of these disenrollments are due to procedural issues, and many will regain coverage once the paperwork is sorted out.

"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," the analysts wrote. "We expect that most of the disenrollees will re-enroll in the individual market or in employer-based insurance."

Other trends to watch as 2023 comes to a close include the ongoing conversation around GLP-1 drugs. These products show significant promise in diabetes and for weight loss, but they come at a cost.

Data from CVS Health estimate that it would cost $1 trillion if every American who is clinically obese was prescribed a GLP-1 drug, according to the report. At present, UnitedHealth executives said that 20% of their prescriptions for these therapies are for weight loss.

"Health insurers can include these costs in policy prices," according to the report. "However, for corporate clients who contract with health insurers for administrative services only and otherwise self insure, the risk is higher, especially if utilization is not effectively controlled."

In addition, changes to the way MA star ratings are calculated hold significant long-term implications for payers, according to the report. Aetna, for instance, saw notable gains, and 87% of its members are now enrolled in plans with four or more stars. 

By comparison, 20% of Aetna's MA members were enrolled in plans with at least four stars.

Elevance Health, by comparison, saw a significant decline from 64% to 35%, according to the report. Centene also posted poor results.