Medicaid Managed Care: The Big Five in PHE Q10 (Q2 2022)

June 30 marked the end of calendar quarter 10 of the COVID-19 Public Health Emergency (PHE), or PHE Q10. For the five national companies with the largest Medicaid managed care businesses, the past two- and one-half years have been a period of particularly robust growth. Since PHE Q1, which ended on March 31, 2020, enrollment in Medicaid managed care organizations grew by 38.3 percent, from 30.1 million to 41.6 million (Figure 1). And, for the three companies for which information is available—Centene, Molina, and UnitedHealth Group—Medicaid revenues increased by 40 percent, from $31.8 billion to $44.4 billion.

After each quarter, publicly traded companies file earnings reports with the Securities and Exchange Commission. Table 1, which is based in part on these earnings reports, summarizes Medicaid enrollment and, where available, Medicaid revenue growth by company.

Some highlights:

  • Centene operates the most MCOs (33), per the KFF Medicaid Managed Care Market Tracker, and has by far the highest Medicaid enrollment (15.4 million). In PHE Q10 (2022 Q2), Centene’s Medicaid enrollment accounted for nearly three-fifths of its total enrollment. Since PHE Q1, Centene’s Medicaid enrollment has increased by 3.6 million (30.8 percent) and its Medicaid revenues have grown by $5.4 billion (31.8 percent). According to the Fortune 500 list, Centene is the 26th largest company in the U.S. (just behind General Motors).
  • CVS Health is the fourth largest U.S. company in 2022, behind Walmart, Amazon, and Apple, but it has the smallest Medicaid footprint of the Big Five. Its health insurer, Aetna, had a Medicaid enrollment of 2.4 million in 15 states. Since PHE Q1, that enrollment has grown by 590,000 or 32.2 percent.
  • Elevance Health (the company formerly known as Anthem) has the second largest Medicaid enrollment among the Big Five, 11.2 million. These enrollees account for 23.8 percent of total Elevance Health enrollment across all product lines. Since PHE Q1, Elevance’s Medicaid enrollment has grown by 3.6 million, or 46.8 percent. Elevance did not provide revenue data for its Medicaid line of business. Elevance Health ranks as no. 20 on the Fortune 500 list of largest U.S. companies.
  • Molina is the smallest of the Big Five as measured by revenues, but it nonetheless ranks 125th on the Fortune 500 list for 2022. Molina’s Medicaid enrollment accounted for 90.1 percent of its total enrollment this quarter. Since PHE Q1, Molina’s Medicaid enrollment has grown by 1.6 million, or 55.2 percent, the largest Medicaid growth rate among the Big Five. Medicaid revenues are up 3.0 billion, or 91.8 percent, since PHE Q1.
  • UnitedHealth Group (UHG)’s revenues made it the fifth largest Fortune 500 company in 2022, right behind CVS Health. In PHE Q10, UHG’s Medicaid revenues accounted for nearly one fifth of its total revenues (19.5 percent). Since PHE Q1, its Medicaid enrollment has grown by 2.1 million, or 35.9 percent, and its Medicaid revenues have increased by $4.2 billion or 36.8 percent.

There’s a reason that these companies, which have other lines of business (e.g., employer group insurance, Medicare Advantage, and the Marketplace) are competing in the Medicaid market: it’s lucrative. Just how lucrative? Actuaries at Milliman recently issued their annual analysis of the financial results for Medicaid MCOs during 2021. Based on a sample of 188 MCOs (these included subsidiaries of the “Big Five” but were not limited to them), the actuaries calculated that the MCOs “recorded $245.3 billion in revenue and achieved composite underwriting gains of 3.5%....” These numbers, the actuaries said, were “the highest MCO composite totals in the [14-year] history of this analysis.” Underwriting gains are “the proportion of revenues that [is] ‘left over’ to fund the MCO’s contribution to surplus and profit after funding medical and administrative expenses.” An underwriting gain of 3.5 percent on $245 billion translates into $8.6 billion (with a “b”).

The Milliman actuaries predict that, when the PHE ends, “Medicaid managed care programs will again experience a major disruption as members are disenrolled from Medicaid programs.” No one can be certain when the PHE will end. What we do know is that on July 15 HHS Secretary Becerra extended the PHE for another ninety days to October 13, 2022.  We also know that the financial analysts who follow publicly traded companies for investors have more than a passing interest in how the Big Five will manage the “major disruption.”

The unwinding won’t just be the largest enrollment event in Medicaid’s history—one that puts the coverage of children and families at risk—it also has the potential to redistribute Medicaid market share, both nationally among the Big Five as well as at the state level between their subsidiaries and other MCOs. Whether this is good for children and families who remain enrolled in Medicaid once the PHE unwinding dust settles is an open question, since there’s so little transparency about individual MCO performance. In any event, CMS has been encouraging state agencies to, among other things, work with MCOs to update the contact information of enrollees (do you know where your enrollees are?) and to reach out to them to provide assistance with the renewal process during the redetermination period.

For their part, the Big Five have their talking points down:

Centene: “…the PHE may be extended beyond October 2022. Our Ambetter [Marketplace] product covers the majority of our Medicaid states, and we believe we are among the best positioned in the healthcare market to capture those transitioning coverage through redeterminations. Our execution plan is well-thought out and we remain agile in working with our state partners and are prepared to support our members and promote continuity of coverage when redeterminations resume.”

CVS Health: “We're assuming obviously that the redeterminations really won't happen until next year of any kind of magnitude, obviously with the extension of the PHE assumption in our guidance. We estimate we've added about 400,000 to 500,000 members as a result of that […] I put a caveat, it's a difficult thing to estimate on the retention side, but we might retain 25% plus or minus of that membership. Obviously, our individual exchange footprint is expanding but still limited in the scope of our overall Medicaid block. So, some of that will help, but still, obviously, a lot to play out.”

Elevance Health: “Recertifications could begin as early as November 2022, but may not occur until 2023 in certain states, and we expect a decline in our Medicaid membership once recertification resumes. At the same time, we expect growth in our Commercial risk-based and fee-based plans, including through the Public Exchange, as members exiting Medicaid in our fourteen Commercial states seek coverage elsewhere.”

Molina: “…we added over 750,000 new Medicaid members since March 31, 2020, when we first began to report on the impacts of the pandemic. We believe this membership increase was mainly due to the suspension of redeterminations for Medicaid eligibility. We expect Medicaid enrollment to continue to benefit from the extension of the PHE period, and the associated pause on membership redeterminations, at least through mid-October 2022.”

UnitedHealth Group: “At this point, we anticipate the impact to Medicaid enrollment as a result of state redetermination activities will be experienced next year. We continue to prepare resources to help people find uninterrupted access to appropriate coverage as this transition occurs.”

There are few issues on which the interests of beneficiaries and those of MCOs are perfectly aligned. Reducing the “major disruption” that the PHE unwinding may bring to Medicaid enrollment is one of them. If state Medicaid agencies don’t execute properly, then eligible individuals will lose coverage for procedural reasons and MCOs will lose enrollees who are in fact eligible. In the Q2 earnings calls, some corporate officials stressed that they were in ongoing communication with state officials and monitoring key statistics like ex parte renewal rates. Advocates should seize the opportunity to join with MCOs in working with state Medicaid agencies to mitigate the disenrollment of eligible individuals for procedural reasons. A good starting point would be more transparency so that both advocates and MCOs could monitor trends in real time.