6 insurers, 6 opinions on rising Medicare Advantage costs

Every major insurer has reported that Medicare Advantage costs are going up. 

On quarterly earnings calls, analysts questioned insurance executives on why utilization keeps climbing, and how deep the uptick will cut into margins. 

Some executives, including at UnitedHealthcare and Elevance Health, said increases are priced for in 2024 guidance. Humana and CVS Health were forced to reduce their earnings predictions when medical spending climbed higher than expected. 

The different stories from industry peers puzzled some analysts — TD Cowen analyst Gary Taylor told Centene executives: "It's been a while since I’ve seen such divergent views across the industry." 

Here's what six industry leaders had to say about the trend: 


The nation's largest Medicare Advantage insurer saw rising Medicare Advantage costs at the end of 2023, but UnitedHealth Group CEO Andrew Witty told investors the company believes its pricing is "entirely appropriate" for the three years ahead. 

Mr. Witty said on a Jan. 31 call that he did not expect increased utilization to have a significant impact on UnitedHealth Group's 2024 outlook. 

More office visits in the fourth quarter of 2023, driven by older adults seeking the RSV vaccine, caused some of the spike in utilization, in addition to increased COVID-19 activity, Mr. Witty said. 

"To be clear, all of that is good news for healthcare. These are seniors, many of whom had not been to the office in a long time," Mr. Witty said. "They've come back in now, got vaccinated, and physicians have picked up on other things." 

Elevance Health 

Elevance Health executives also said Medicare Advantage utilization was in line with predictions. 

Mark Kaye, CFO of Elevance Health, told investors the company saw "pockets" of increased utilization in Medicare Advantage, especially in orthopedics, and seasonal increases due to respiratory viruses. 

"But again, utilizations were aligned with what we planned," Mr. Kaye said on a Jan. 24 call with investors. "We'll continue to monitor our claims trends closely, including prior authorization data. We remain confident that our Medicare Advantage bids for 2024, and our pricing for commercial, do reflect appropriate projections for utilization and medical cost trends." 


Humana's share prices tumbled after the company cut its earnings guidance for 2024 and 2025 based on rising Medicare Advantage utilization rates. 

The company reported a $541 million loss in the fourth quarter of 2023, caused by what executives called "unprecedented" increases in Medicare Advantage rates. 

Humana CFO Susan Diamond said the increase in utilization was caused by increased inpatient costs and more spending for outpatient procedures and supplemental benefits. Humana also saw an increase in inpatient short-stays and a decrease in observation stays. Ms. Diamond said the company needs more time to assess if the two are correlated. 

Humana is the second-largest Medicare Advantage insurer, with MA making up around 35% of its 16.9 million total members. 

CEO Bruce Broussard told Humana investors on a Jan. 25 call that he expects rising utilization to cut across the entire industry. 

"I look at next year as a year that I think the whole industry will possibly reprice. I don't know how the industry can take this kind of increase in utilization along with regulatory changes that will continue to persist in 2025 and 2026. I expect the industry to have disciplined pricing as a result of that," Mr. Broussard said. 


As investors sweat shrinking margins in Medicare Advantage, Cigna is getting out of the business entirely. 

The company announced a deal to sell its MA business to Health Care Service Corp. for $3.3 billion on Jan. 31. Cigna has 596,977 Medicare Advantage members, a small share of its 19 million insurance members. 

The company had a sunnier picture of medical-loss ratio than some of its peers more involved in MA, with its 81.3% ratio coming in lower than in 2022. 

The performance of the company's Medicare Advantage business in the fourth quarter of 2023 was in line with expectations, Cigna Group CEO David Cordani told investors Feb. 2. 

The Cigna Group will still be involved in the Medicare Advantage business through its health services business, Evernorth, Mr. Cordani said. 

"The Medicare Advantage offering, broadly speaking, in the marketplace is a very attractive offering for seniors, and it has a long-term proven track record of delivering attractive benefits," Mr. Cordani said. 

The sale is expected to close in early 2025. 


Centene is also experiencing increased Medicare Advantage utilization, but the rates are in line with expectations, executives said. 

CEO Sarah London said outpatient utilization was the main driver of increasing costs, especially in orthopedics and cardiovascular care. 

"While Medicare has been a hot topic for the industry of late, we are pleased that the annual enrollment period played out largely as expected for Centene, and our 2024 financial projections for Medicare remain unchanged from investor day," Ms. London told investors Feb. 6. 

Centene is the sixth-largest MA insurer in the U.S. As investors peppered executives with questions on Medicare costs, CFO Drew Asher tried to redirect attention to the company's larger business lines. 

"Isn't it interesting we're spending so much time on 12% of our revenue? $16 billion is an important lever, but we actually have some other pretty good business," Mr. Asher said. 

CVS Health

CVS Health also reduced its earnings guidance for 2024 based on rising Medicare Advantage utilization.  

CFO Tom Cowhey said CVS was expecting its Medicare Advantage business to be marginally profitable in 2024. 

Outpatient costs accelerated in the last weeks of 2023, along with spending in dental and vision and increased costs from vaccinations, Mr. Cowhey told investors on a Feb. 7 call. 

"It's a lot of the same categories that we've been talking about all year, and we've been trying to actively get ahead of in our guidance," Mr. Cowhey said. 

The company is still committed to hitting its 4% to 5% margin targets in Medicare Advantage by 2025, CVS CEO Karen Lynch said. 

"While the Medicare Advantage market has been challenged recently, our view of the long-term opportunity offered by this business remains unchanged," Ms. Lynch said Feb. 7. 

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Top 40 articles from the past 6 months