September 17, 2021

Second Quarter Earnings Bring Profits for Insurers, But Delta Variant Signals Uncertainty

In last year’s second quarter (Q2) earnings statements, insurers reported major profits in the wake of COVID-19-related cancelations and delayals of elective procedures and ambulatory services. In Q2 this year, many health plan enrollees returned to their providers for the care they missed last year. As a result, insurers’ earnings are not as high as last year, but the companies are still posting healthy profits. In our review of the 2021 Q2 earnings reports of six major for-profit insurers, we found that profits fell for Humana, UnitedHealth, Anthem and Cigna compared to Q2 2020, while Centene reported a loss. However, most insurers appear to be making similar or greater gains compared to their 2019 earnings.

Insurer 2019 Q2 Profits 2020 Q2 Profits 2021 Q2 Profits
UnitedHealth $3.4 billion $6.6 billion $4.3 billion
CVS/Aetna $1.9 billion $2.9 billion $2.8 billion
Anthem $1.1 billion $2.3 billion $1.8 billion
Cigna $1.4 billion $1.8 billion $1.5 billion
Centene $495 million $1.2 billion ($535 million loss)
Humana $940 million $1.8 billion $588 million

Data obtained from 2019, 2020 and 2021 quarterly reports from UnitedHealth Group, CVS, Anthem, Cigna, Centene, and Humana.

Insurers Report that Health Care Utilization is Rebounding Faster than Expected, and COVID-19 Costs Loom

Payers across the board are reporting an increase in utilization of non-COVID-19 care compared to the second quarter last year. Nearly all insurers described higher-than-expected routine care utilization for the second quarter. Centene reported that care utilization was above baseline levels for members in the individual marketplace, enough to contribute to a loss in their second quarter. Anthem reported outpatient and physician services above baseline, while inpatient and emergency room visits still fell below the pre-pandemic levels. Similarly, Cigna found emergency room visits declined but both inpatient and outpatient utilization increased.

Meanwhile, the recent rise in COVID-19 cases and the highly infectious nature of the Delta variant has created additional uncertainty for insurers’ projections about utilization of health care services. Humana called 2021 the year of “COVID-19 transition,” clouding their predictions because costs for both COVID-19 and non-COVID-19 care were higher than anticipated. CVS told investors they were making more conservative projections for 2021 due to emerging pandemic-related changes. The CEO of Centene said that the Delta variant would result in a “choppy” remainder of 2021.

Cigna, Humana, and Centene reported that the costs associated with COVID-19 testing, treatment, and hospitalizations from the second quarter were higher than expected, thanks in large part to the highly infectious nature of the Delta variant. This is almost certain to continue into the third quarter as COVID-19 transmission rates have remained high throughout the summer. Anthem and UnitedHealth also predicted higher COVID-19 costs for the remainder of 2021, noting further the potential for future variants. Executives from Humana told investors that the company would be facing a “$600 million headwind” as the insurer manages the ongoing impacts from the pandemic. Indeed, new research from KFF indicates that spending associated with preventable unvaccinated COVID-19 hospitalizations totaled over $2 billion in June and July of 2021.

Government Programs Continue to Serve as Source of Growth for Insurers

Earnings reports from insurers consistently indicate that government-sponsored programs are a source of growth. Medicare Advantage membership has continued to climb for Humana, Cigna, and Anthem. Medicaid managed care membership also increased, which insurers partly attribute to the continuous coverage provision of the Families First Coronavirus Response Act of 2020. For example, UnitedHealth had their Medicaid managed care enrollment grow by over 150,000 members over the first and second quarter, which they also attribute to new contracts in Hawaii and Ohio.

The COVID-19 special enrollment period and enhanced premium subsidies from the American Rescue Plan Act, signed into law in March 2021, increased enrollment for insurers operating in the individual marketplaces. Cigna told investors that growth in the individual market was one of the primary sources of their total membership growth of 249,000 in the second quarter. Overall, more than 2 million people signed up during the federal special enrollment period that ended August 15, and more insurers are seeing this market as an opportunity for growth.

The Profits of 2020 Won’t be Repeated This Year, but Insurers are Not Struggling

Among the six insurers listed above, CVS and UnitedHealth reported the highest profits. Both companies have diversified portfolios that include provider services, pharmacy benefits, retail, and more. UnitedHealth attributed revenue growth to its health services business Optum. CVS reported that, although pandemic-related pent-up demand led to higher costs this year, this was more than offset by revenue from their other lines of business that performed favorably as a result of the pandemic, such as their retail business, pharmacy and administration of COVID-19 vaccinations. Cigna reported a 10 percent year over year increase in revenue, largely attributed to its health services unit Evernorth, which includes the pharmacy benefit manager Express Scripts, specialty pharmacy Accredo, and consulting services for other payers.

The findings from these payers’ Q2 earnings reports indicate the challenge insurers are having predicting utilization amidst a pandemic. Insurers appear concerned about the simultaneous growth of elective procedures and COVID-19 costs. However, insurers still earned billions in profits this quarter, and exceeded Wall Street expectations in some cases. Indeed, despite uncertainty ahead, insurers on the whole seem to expect that 2022 will be a more predictable and normal year.





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