Beginning in 2025, Medicare beneficiaries have a maximum out-of-pocket limit of $2,000 annually. The change led Medicare Part D plan sponsors to increase premiums, which the government later offset with a premium stabilization demonstration program.
On fourth-quarter earnings calls, insurer CFOs discussed how they expect the regulatory changes to impact their medical spending and the seasonality of their earnings in 2025.
- UnitedHealth Group CFO John Rex said the Inflation Reduction Act changes would affect the company’s medical benefit ratio in 2025.
Prescriptions for some high-cost drugs increased faster than the company expected, as “drug companies took early advantage of the Inflation Reduction Act,” Mr. Rex told investors on a Jan. 16 call.
The IRA had less of an effect on the company’s rising medical costs than changes in the company’s Medicare Advantage and Medicaid membership mix, according to Mr. Rex.
- Centene CFO Drew Asher said the company finished 2024 with its Medicare Part D business in a strong position.
“We finished PDP very strong, which is good to see in the first major year of the IRA changes. We’re getting the bids, the execution and the cost structure right. That gives us confidence as we’re headed into 2025 with further IRA changes,” he said on a Feb. 4 call.
- Celeste Mellet, CFO of Humana, told investors the IRA is expected to be a drag on the company’s medical benefit ratio this year.
The changes will also be the biggest contributing factor to changes in the seasonality of the company’s earnings, Ms. Mellet said on a Feb. 11 call. Humana plans will see increasing liability for drug costs through the year, as more members reach the $2,000 cap.
- CVS Health CFO Tom Cowhey told investors the IRA changes could have a significant effect on the seasonality of the company’s earnings.
“[Medical benefit ratios] in Aetna will be lowest in the first quarter and highest in the fourth,” Mr. Cowhey said on a Feb. 12 call. You could see an 8-point swing between the first quarter and the fourth quarter as you think about the progression of earnings and the progression of [medical benefit ratios].”
