Medicaid Managed Care: The Big Five in PHE Q11 (Q3 2022)

September 30 marked the end of the 3rd quarter of this calendar year.  It also marked the end of the 11th quarter of the Public Health Emergency (PHE).  The two are not unrelated.  During the PHE, states receive an additional 6.2 percentage points on their regular federal matching rate if they agree not to terminate coverage for individuals who are enrolled on or after March 18, 2020.  To date, all states have opted to take the additional federal funds, and largely as a result, total Medicaid enrollment has grown by 29 percent, from 63.9 million to 82.3 million.

As shown in Figure 1, this rising tide has lifted the boats of the “Big Five”—Centene, CVS Health (Aetna), Elevance Health (formerly Anthem), Molina, and UnitedHealth Group.  All but CVS Health have seen growth in their Medicaid lines of business in every single quarter since states suspended Medicaid eligibility redeterminations in March 2020.  (For some companies, this growth reflects enrollees gained as a result of acquisitions of other MCOs in addition to the effects of the PHE-related prohibition on termination of enrollment).  Combined Medicaid enrollment for all five companies has increased by 11.7 million, or 39 percent, over the past 11 quarters.

Table 1 presents company-specific results for the quarter:

  • Centene has the largest Medicaid enrollment among the “Big Five:” nearly 15.7 million beneficiaries in 33 MCOs in 28 states. About 6.6 million (42 percent) of these enrollees are children under 18, according to management during the company’s earnings call.  Centene’s Medicaid enrollment has grown by 3.9 million, or about 33 percent, since PHE Q1; its quarterly Medicaid revenues rose by $6.3 billion, or about 37 percent over the same period.  Centene is in the process of resolving its liabilities to a number of states in connection with its pharmacy benefit management business.
  • CVS Health (Aetna) is the nation’s fourth largest company by revenues, behind Walmart, Amazon, and Apple. After 10 straight quarters of growth in Medicaid enrollment, CVS Health reported a decline of 244,000 members, or 10 percent, from the quarter ending June 30. The company’s 10-Q report attributes this to “the expected loss of a large customer during the three months ended September 30, 2022.”
  • Elevance Health (formerly Anthem) has 11. 3 million Medicaid enrollees, second only to Centene’s 15.7 million. Medicaid beneficiaries account for 24 percent of Elevance Health’s total enrollment of 47.3 million.  This total exceeds UnitedHealth Group’s total domestic enrollment of 46.0 million (a comparison of Medicaid revenues is not possible because Elevance Health does not report these data).  Elevance Health’s Medicaid enrollment has grown by 3.7 million since PHE Q1, or 48.6 percent.
  • Molina has the smallest Medicaid enrollment of the “Big Five”—4.7 million—but is the most heavily committed to the Medicaid market. Its Medicaid enrollees account for 90 percent of its total enrollment and its Medicaid revenues of $18.4 billion represent 80 percent of its total premium revenues.  Since PHE Q1, its Medicaid enrollment has grown by 1.7 million, or 57 percent, and its Medicaid revenues per quarter have increased by $2.8 billion, or 86 percent.  Molina is one of two “Big Five” companies to report a Medicaid-specific Medical Cost Ratio (medical costs as a percentage of premium revenue) of 88.5% in the quarter. The other is Centene, with a Health Benefits Ratio (medical costs divided by premium revenues) of 90.2% in the quarter. (From an investor’s standpoint, the lower the ratio the better the company’s performance).
  • UnitedHealth Group ranks #5 on the Fortune 500 list of companies for 2022, right behind CVS Health. Its UnitedHealthcare business reported Medicaid enrollment of 8.0 million in PHE Q11, or 17 percent of UnitedHealthcare’s total domestic enrollment of 46.0 million.  Over the 11 PHE quarters, UnitedHealthcare’s Medicaid enrollment has grown by 2.1 million or 36 percent.  Its $16.0 billion PHE Q11 Medicaid revenues accounted for 26 percent of its total revenues of $62.0 billion in the quarter; those quarterly revenues have increased by $4.6 billion, or 40 percent, since PHE Q1.

The Medicaid market remains attractive to these companies, which continue to compete for future market share in state contract procurements.  The largest of these so far this year is unfolding in California, where four of the Big Five (all but UnitedHealthcare) submitted proposals, not all of which were successful.  Although the California procurement is far from being concluded, it has already produced some welcome transparency about the performance of these companies’ subsidiaries in other states.

On October 13, HHS Secretary Becerra extended the PHE declaration for another 90 days, through January 11, 2023.  A reasonable working assumption is that Medicaid enrollment and revenues for the Big Five will continue to grow during PHE Q12/Q4 2022; we’ll know for sure early next year when the companies post their year-end financial results.

In the meantime, speculation is underway about whether the Secretary will extend the PHE further into 2023.  The financial analysts following these companies for institutional investors are particularly interested in how the unwinding of the PHE will affect the companies’ Medicaid enrollment and revenues in 2023 and beyond.  Will the unwinding be a “jump ball situation,” with beneficiaries who have been determined ineligible for Medicaid choosing among competing Qualified Health Plans (QHPs) in the Marketplace?  Or will the companies be able to funnel these individuals from their Medicaid products into their Marketplace products to reduce their net enrollment losses.

In general, the response of company management teams is that they expect the PHE to end early in 2023, but that whenever it does, they expect their Medicaid enrollments to decline.  Centene and Elevance Health both expect that this decline in Medicaid enrollment will be offset by an increase in enrollment in their Marketplace plans and other commercial products.  (As Katherine Hempstead at RWJF has documented, the number of counties in which companies' Medicaid and Marketplace plans overlap is increasing.)  Only Molina management, in response to analysts’ questions during its October 27 earnings call, quantified the expected impact of the resumption of redeterminations:  a reduction of $1.6 billion in Medicaid revenues over two years, a “headwind” which they believe will be offset by a number of “tailwinds,” including the new MCO risk contracts the company has been awarded in California, Iowa, and Nebraska.

All MCOs, including those owned by the Big Five, share a common interest with beneficiaries in minimizing loss of Medicaid during the PHE unwinding for procedural reasons.  MCOs can be effective partners with states in communicating with enrollees and supporting them during the renewal process.  The Big Five also have an incentive to retain as many of their eligible enrollees as possible, whether in their Medicaid, Marketplace or commercial products. Here it’s less clear what is best for beneficiaries, particularly those who have ongoing health needs requiring uninterrupted care.  As our colleagues at the Center for Health Insurance Reform and the Urban Institute have explained, ensuring continuity of care at the time of this transition will require thoughtful policies from states and Marketplaces alike, not to mention the MCOs and QHPs involved.  To this point, we recommend the tips and best practices developed by our CCF colleagues Tricia Brooks and Allie Gardner.