With second quarter earnings now reported, health insurers are navigating elevated medical cost trends that are hurting their profit margins, driven by increased member utilization of specialty drugs, behavioral health, and emergency services. In their calls with investors, executives specifically noted rising acuity in the Medicare Advantage and ACA markets, “aggressive” provider coding, and the rising demand for stop-loss insurance from employers.
Notably, Humana was the only major insurer to report utilization trends in line with its original expectations, even outperforming in specialty drug use due to increased direct-to-consumer partnerships and a more favorable drug mix.
UnitedHealth Group
The Medicare Advantage business has seen increased care activity with outpatient services (including physician care), which accounted for 70% of the pressure this year in the segment. Inpatient utilization has also accelerated and is expected to grow over the full year. Emergency room and observation stays are up, with more services reportedly being offered and bundled into each encounter. The company’s overall MA medical cost trend is now expected to be approximately 7.5% for 2025, up from an initial estimate of just over 5%.
In the commercial business, utilization pressures are happening in outpatient care, including orthopedic spending and pharmacy infusions. The ACA business has faced the industry-wide morbidity trend.
For Medicaid, the company is seeing elevated trends in behavioral health, where the cost is running at 20%, as well as in pharmacy and home health services.
Elevance Health
The ACA business has seen a large increase in overall morbidity post-Medicaid redeterminations, with higher utilization in emergency room visits, behavioral health services, and specialty pharmacy. These elevated trends are also affecting the large group commercial business. In addition, ACA members are using ER services at nearly twice the rate of commercial group members.
“We also do see a subset of providers employing more aggressive coding tactics and in some ways, inappropriately leveraging what we think of as the independent dispute resolution process and that obviously inflates allowed amounts,” CEO Gail Boudreaux said.
The Medicaid business is seeing elevated acuity levels resulting from ongoing disenrollment, and long-term services and support, behavioral health, and inpatient surgical care are contributing to increased costs.
Cigna Group
Cigna executives noted elevated cost trends in specialty injectables, GLP-1s, and behavioral health services in Q2. Specialty pharmacy is becoming a larger portion of healthcare expenses, growing from mid-20% of total medical costs currently to potentially 30% in the near future.
Cigna also highlighted higher-than-expected utilization in the individual exchange business. There has also been increasing demand for stop-loss insurance from self-insured employers, with a 13% increase in premiums in Q2.
CVS Health
Medical cost trends remain elevated across CVS’ lines of business, especially within the group Medicare Advantage segment. Chief Strategy Officer Larry McGrath cited “robust benefit or supplemental benefit offerings” and higher acuity patients at Oak Street Health.
Centene
The ACA business is seeing higher-than expected utilization, driven by new members with higher morbidity and “aggressive provider coding.”
In the Medicaid space, the company is seeing increased cost pressures in behavioral health, home health, and high-cost drugs. Behavioral health was the most significant pressure, with Applied Behavioral Analysis being highly utilized across a number of markets. Cancer drugs and gene therapies contributed to pressures in the pharmacy category.
ABA services in Florida are causing the most pressure due to inadequate rates and continuity of care provisions, which led to higher-than-expected utilization, while home health in New York is facing similar challenges driven by rate insufficiencies and state program changes.
Molina Healthcare
In the Medicaid business, the company is seeing cost pressures from behavioral health services, high-cost drugs (GLP-1s, cancer and HIV therapies), increased ER visits leading to more inpatient admissions, and a higher volume of primary care visits and preventive screenings.
Within the Medicare business, utilization is up among high-acuity dual-eligible members, including long-term services and supports, and high-cost drugs. These pressures are expected to continue into the second half of the year.
In the ACA segment, the company has increased its assumed medical cost trend from 7% to 11% because of worsening overall morbidity marketwide.
