Health Plan Weekly

After multiple disappointing quarters and amid reports that CVS Health Corp.’s board of directors was considering breaking up the company, CVS said on Oct. 18 that it has named a new CEO. Additionally, CVS disclosed that its third-quarter earnings per share (EPS) will be lower than it previously estimated, and its medical loss ratio (MLR) higher — citing medical cost trends that continue to defy expectations.  

Both moves caught some Wall Street analysts by surprise, although one offered that “it is hard, given the operational and stock underperformance, to say a change at the top is undeserved.” 

Elevance Health, Inc. disclosed in its third-quarter earnings release on Oct. 17 that it significantly lowered profit guidance for this year, citing higher utilization in Medicaid as the primary driver. Although executives said they remained confident about the company’s long-term growth, Elevance’s stock price declined by more than 12% and analysts noted they did not anticipate the insurer’s announcement.  

Elevance had adjusted diluted earnings per share (EPS) of $8.37 in the third quarter, well below the $9.66 Wall Street consensus. The company now expects adjusted diluted EPS of about $33 this year, down from its previous estimate of at least $37.20, which it revealed during its first-quarter earnings call and reaffirmed during its second-quarter earnings call in July.  

The Blue Cross Blue Shield Association (BCBSA) and its 33 Blues plans have agreed to pay $2.8 billion — and execute significant operational changes — as part of a tentative settlement that would resolve a long-running class-action case brought by health care providers.  

The proposed settlement marks the second time in recent years that Blues plans have inked a deal to settle an antitrust case brought against them, and it is the largest antitrust settlement in the history of the U.S. health care sector. Industry experts tell AIS Health, a division of MMIT, that the terms of the latest settlement could alter the balance of power in Blues plans’ contract negotiations with providers. 

UnitedHealth Group, whose earnings reports are often seen as a bellwether for the entire managed care sector, disclosed third-quarter results on Oct. 15 that did not bode well for its fellow publicly traded health insurers. Still, some Wall Street analysts expressed optimism that the headwinds may be temporary, at least for UnitedHealth. 

UnitedHealth’s medical loss ratio (MLR) in the quarter — the closely watched metric indicating how much premium dollars are being spent on medical care — was 85.2%. That figure was higher (worse) than the Wall Street consensus estimate of 84.4%, providing one reason why UnitedHealth’s stock dipped after its quarterly results were released.