A UnitedHealth Group medical health insurance card is seen in a wallet, Oct.14, 2019.
Lucy Nicholson | Reuters
Good afternoon! Health insurers are feeling the squeeze as older patients head to the doctor greater than expected.
CVS, which owns health insurer Aetna, on Wednesday slashed its full-year profit outlook, citing the potential for higher medical costs to bite into its profits. That warning got here two weeks after insurance giant Humana cited the identical factor because it issued a dismal 2024 earnings guidance.
Medical costs from Medicare Advantage patients have spiked over the past yr as more older adults return to hospitals to undergo procedures that they had delayed throughout the Covid pandemic, comparable to joint and hip replacements.
Medicare Advantage, a form of privately run medical health insurance plan contracted by Medicare, has long been a key source of growth and profits for the insurance industry. Greater than half of Medicare beneficiaries are enrolled in such plans, enticed by lower monthly premiums and additional advantages not covered by traditional Medicare, in response to health policy research firm KFF.
But investors have turn out to be more concerned concerning the runaway costs, which insurance firms say may not come down anytime soon. Other firms within the Medicare Advantage space are UnitedHealth Group and Elevance Health.
CVS executives said on an earnings call Wednesday that the corporate’s insurance division saw barely higher rates of outpatient care, including hip and knee surgeries, within the fourth quarter. Additionally they saw more use of supplemental advantages comparable to dental and vision care, and “some pressure” from RSV vaccinations.
The executives said inpatient care, or formal hospital admissions, was in keeping with the corporate’s expectations for the period.
The insurance segment’s medical profit ratio — a measure of total medical expenses paid relative to premiums collected — increased to 88.5% for the fourth quarter from 85.8% throughout the year-ago period. A lower ratio typically indicates that the corporate collected more in premiums than it paid out in advantages, leading to higher profitability.
Last month, Humana said it saw a fair greater jump in medical costs within the fourth quarter. The corporate said the rise got here partly from higher outpatient activity, but the corporate largely blamed it on an unexpected increase in inpatient care in November and December.
That pushed its medical profit ratio in its insurance segment to a whopping 91.4% for the quarter, up from 87.4% for a similar period a yr ago.
Higher medical costs could also be a bigger problem for Humana than they’re for CVS and other insurers. That is because Humana is more depending on its Medicare Advantage business than its rivals, because it accounts for greater than 80% of its earnings, UBS analysts said in a Jan. 25 note.
They added that there isn’t a other a part of Humana’s business that might meaningfully dampen the hit from higher medical costs on the insurance side. Humana has a specialty pharmacy segment called CenterWell, nevertheless it only brought in roughly a fifth of the revenue that the corporate’s insurance division booked for the fourth quarter.
Meanwhile, CVS has a retail pharmacy business and a health services segment, each of which posted stronger-than-expected revenue for the quarter.
One other insurance giant that has been seeing higher medical costs, UnitedHealth Group, also has large health-care services and pharmacy operations that diversify its earnings streams.
The larger query for all three firms is how exactly a latest policy called the “two-midnight rule” will impact their insurance businesses.
Starting this yr, Medicare Advantage plans should cover their members’ hospitalizations at the upper inpatient rate if their doctors predict they’ll should stay beyond two midnights. That policy has applied to traditional Medicare plans for nearly a decade.
The newest in health-care technology
An indication is posted in front of the 23andMe headquarters on February 01, 2024 in Sunnyvale, California.
Justin Sullivan | Getty Images
Trouble at 23andMe
It has been a rough few months for 23andMe.
The genetic testing company, which rose to prominence with its at-home DNA testing kits, reported rocky fiscal third-quarter results last week. 23andMe posted revenue of $45 million for the quarter, which is down from the $67 million it reported in the identical period last yr.
In the course of the company’s quarterly call with investors, co-founder and CEO Anne Wojcicki said 23andMe is considering splitting up its consumer and therapeutics businesses to assist boost its stock price, which has been trading under $1.
The corporate received a deficiency letter from the Nasdaq Listing Qualifications Department in November, giving the corporate 180 days to bring its share price back above $1. If 23andMe fails to clear the brink, it’ll be delisted from the exchange.
“We now have not made any definitive decisions about what we’re going to do,” Wojcicki said throughout the call.
23andMe can be contending with mounting legal troubles because it faces greater than 30 class-action lawsuits following a knowledge breach it disclosed late last yr that affected nearly 7 million people. The corporate has incurred $2.7 million in expenses related to the incident to this point.
For now, investors are watching to see how 23andMe navigates the difficult road ahead.
Layoffs across Amazon Pharmacy, One Medical
Last week, Amazon cut a “few hundred roles” across its One Medical and Pharmacy units, the company confirmed to CNBC’s Annie Palmer.
In a memo to employees, Amazon Health Services lead Neil Lindsay said the corporate has “identified areas where we are able to reposition resources,” resulting in the reductions.
Amazon has pushed into the health-care industry in recent times as it really works to construct out its own medical ecosystem.
In 2018, the corporate announced plans to purchase the net pharmacy company PillPack, which might later help Amazon launch its own pharmacy. 4 years later, Amazon shared that it will acquire the first care provider One Medical for roughly $3.9 billion.
But despite its lofty ambitions in health care, the segment shouldn’t be exempt from CEO Andy Jassy’s aggressive cost cutting efforts. The corporate has announced job cuts inside its Audible, Prime Video, Twitch, MGM Studios and Buy with Prime divisions in recent weeks, adding to the greater than 27,000 layoffs the corporate began carrying out in late 2022.
You possibly can read the total memo concerning the recent Amazon Pharmacy and One Medical layoffs here.
Be at liberty to send any suggestions, suggestions, story ideas and data to Annika at annikakim.constantino@gmail.com and Ashley at ashley.capoot@nbcuni.com