Insurers are reporting rising costs in the Medicare Advantage business but differ in their predictions of how these trends will affect their business in 2024.
On a Feb. 6 call, Centene executives reassured investors the company priced for rising costs in its 2024 guidance.
"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," Centene CEO Sarah London said.
Centene was the sixth largest Medicare Advantage insurer in 2023, according to KFF. Humana, the second-largest insurer, cut its 2024 and 2025 earnings expectations on the assumption that Medicare costs would continue to rise. CVS Health also reduced its 2024 earnings guidance based on rising Medicare Advantage expenses.
UnitedHealth Group, the largest Medicare Advantage insurer, said it priced for the rising costs.
"We believe our assumptions of ongoing care activity and approach to supplemental benefit management are entirely appropriate for the environment we are planning for and feel positive about our positioning for growth entering this three-year period," UnitedHealth Group CEO Andrew Witty said Jan. 12.
Elevance Health projected a flat year for Medicare Advantage membership growth, but executives said costs in the business were developing as expected.
The difference in narratives has left some analysts puzzled.
"There's two camps this quarter: There's Centene and United saying the sharp fourth-quarter [Medicare Advantage medical loss ratio] spike means nothing for '24, and then there's Humana, who said the sharp spike in the quarter is the new baseline heading into '24," TD Cowen analyst Gary Taylor said on Centene's earnings call. "It's been a while since I’ve seen such divergent views across the industry."
Centene CFO Drew Asher said while the company is "not happy" with the level of outpatient utilization it is seeing, it is in line with the elevated levels it first reported in June of last year.
Mr. Asher tried to redirect investors' attention to Centene's larger businesses: marketplace and Medicaid.
"Isn't it interesting we’re spending so much time on 12% of our revenue? $16 billion, an important lever, but we actually have some other pretty good business," Mr. Asher said.