You’ve heard it here before: for children and families in forty states and the District of Columbia, managed care organization (MCO) performance determines if they get the care to which they are entitled. And, for many MCOs, this performance is influenced by the rules, regulations, and corporate culture of their national parent firm. As of June 30, 2021, five national firms (Anthem, Aetna/CVS, Centene, Molina, and UnitedHealth Group) were responsible for the care of 37.5 million Medicaid beneficiaries. According to my back-of-the-envelope math, that is roughly two out of every five people covered by Medicaid in the country. With North Carolina’s transition from a fee-for-service delivery system to managed care, these five companies own 119 MCO subsidiaries in 37 unique states (see map).
Medicaid Managed Care Organization Subsidiaries
So, how do we tell how well these companies are doing for kids and parents? One way is to look at what they are telling the state agencies that regulate and pay them. Individual MCOs are supposed to report information to state Medicaid agencies on the delivery of services, operations, and quality improvement. Yet, all too often, this information is not made public—even when required by federal Medicaid transparency regulations. Quarterly financial reports required by SEC regulations (10-Qs) show what these parent firms tell their other boss—shareholders and potential investors.
Parent Company Financial Results for 6 Months Ending June 30, 2021
The last time we checked in on the “Big Five’s” financials they were reporting strong returns for the calendar year 2020. With the pandemic-related disenrollment freeze in place and people delaying care during lock-downs, enrollment was up and claims were down. This time around, we were wondering what happened as people returned to the doctor and caught up on missed care in the first half of 2021? Well, based on what we can glean from their second-quarter filings, the five still seem to be doing pretty well for themselves. Medicaid enrollment grew 14.9 percent on average since June 2020 and Medicaid-specific revenue was up for those who reported it.
Aetna (CVS) (Market Cap $114.10 billion) Aetna, the health benefits line of business of CVS corporation, covers the fewest Medicaid beneficiaries of the “Big Five”—2.7 million—about the size of the programs in Alaska, Delaware, DC, Idaho, Maine, Montana, Nebraska, New Hampshire, and Rhode Island, and Vermont combined. In their filing, they note that they lost a large Medicaid administrative service customer during the second quarter, but offer no further details. Total Medicaid enrollment was still 7.1 percent higher year-to-year. While they report a medical benefit ratio for all insurance/administrative service products of 83.6 percent for the second quarter of 2021, they offer no clues as to the ratio of their medical expenses relative to administrative costs and profits for their Medicaid line of business. The firm notes that the increase in care utilization in 2021 “is largely being offset by an improved revenue outlook and operating expense management.”
Anthem (Market Cap $92.71 billion) Anthem covers 44.3 million individuals nationwide, 9.8 million of whom are Medicaid beneficiaries. While the company does not break out Medicaid revenues specifically in its financial reports, it does list $39.3 billion in revenues during the first six months of 2021 from “government business” which includes Medicare, Medicaid, National Government Services, and the Federal Employee Health Benefits program (FEHB). This figure is a 13.4 percent increase compared to the same time last year. Anthem’s prescription drug division, IngenioRx, also saw an increase in operating revenue “related to increased Medicaid membership within our Government Business segment.”
Centene (Market Cap $38.20 billion) Centene operates the most MCOs (38), spans the most unique states (28), and enrolls the largest number of Medicaid beneficiaries (14 million) of the five firms. Enrollment has grown 11.1 percent since last June and Medicaid revenues for the first six months of 2021 were 14 percent higher than the same time in 2020. The company reports paying $88 million to the state of Ohio and $55 million to the state of Mississippi in no-fault settlements for misrepresenting the fees it collected from the states through its pharmacy benefit management arm, Envolve. The company has reserved an additional $1.1 billion for future settlements and warns that “additional claims, reviews or investigations relating to the Company’s PBM business may be brought by other states.” Centene also warns that “Medicaid state rate actions and risk corridor mechanisms as a result of the COVID-19 pandemic” could impact future profits.
Molina (Market Cap $15.18 billion) Molina is the most Medicaid-centric of the “Big Five,” with 3.9 million Medicaid beneficiaries accounting for 83.6 percent of its covered lives and over three-quarters of its total revenues. Molina’s Medicaid enrollment is 25.8 percent higher than it was in June 2020 and revenues for the first two quarters were 30.3 percent higher compared to 2020. Molina was the only company to publish a Medicaid-specific “medical care ratio”—88.3 percent for the first half of the year. They estimate that they will owe $166 million to states as part of retroactive risk corridors for the first six months of 2021, mostly from its Medicaid line of business.
UnitedHealth (Market Cap $393.39 billion) Medicaid enrollment in UnitedHealth was 7.1 million at the end of June, about 16.2 percent of its overall US enrollment of 44.1 million. While UnitedHealth does not break out Medicaid revenues, “Community and State” revenues, which includes Medicaid, totaled $26 billion for the first six months of 2021 and accounted for about 24.5 percent of all revenues.
In short, these financial reports show that 2021 has not been a bad year for the Big Five thus far—both Medicaid enrollment and revenues have increased considerably. While some firms are warning investors that states’ use of Medicaid risk corridors may limit profits, there are a lot of unanswered questions. Only Centene and Molina report Medicaid specific revenues and only Molina includes something akin to a Medicaid-specific medical loss ratio (MLR-their “medical care ratio”). Without Medicaid specific operating costs, revenues, and MLRs, it is impossible to get a full picture of if the firms are being responsible stewards of public funds. Regardless, the financial filings aimed at shareholders and investors can tell you more about the companies than anything included in the public-facing reports on Medicaid.gov. (See Andy's blog on transparency.)
Market caps are current as of August 18, 2021.