The Q2 2024 earnings reports for the “Big Five” Medicaid managed care companies are in.  They tell us that the PHE unwinding is winding down, but it’s still driving declines in Medicaid enrollment for the companies as a group. Here are the numbers.

For the fifth consecutive quarter, beginning with Q2 2023, Medicaid enrollment for the Big Five as a group has declined, although the rate of decline is slowing.  As shown in Figure 1, total Medicaid enrollment reported by all five companies dropped from 44.2 million at the end of March 2023, when the unwinding began, to 37.1 million as of June 30.  The drop in total enrollment from Q1 2024 to Q2 2024 was 794,000, or 2.1 percent; this compares with a 14.4 percent drop between Q1 2023 and Q1 2024.

For each of the companies, Medicaid enrollment reflects a number of factors, including terminations of eligibility due to the unwinding, re-enrollments by those terminated, procurement wins and losses, and acquisitions and divestitures. The primary driver of this net enrollment decline, however, is the PHE unwinding, which company management teams generally refer to as “redeterminations.”  CCF analysis indicates that from the start of the unwinding on April 1, 2023 through June 30, 2024, there has been a net enrollment decline of 14.69 million Medicaid beneficiaries, including 5.461 million children. Since the Big Five together control about half of the Medicaid managed care market nationally, they had major exposure to these mass terminations.

While net Medicaid enrollment for the Big Five as a whole has declined since the start of the unwinding, one company—Molina Healthcare—has experienced a net enrollment increase over this period.  Molina’s Medicaid enrollment as of June 30 is 108,000, or 2.2 percent larger, than its enrollment as of March 30, 2023.  All of the other companies have experienced net enrollment decreases since March 30, 2023 ranging from 24.1 percent (Elevance Health) to 9.3 percent (CVSHealth/Aetna). (Table 1).

One would expect that if a company’s Medicaid enrollment declines its Medicaid revenues would decline as well.  Only three of the Big Five report Medicaid revenues:  Centene, Molina, and UnitedHealth Group (Table 2).   Compared to Q1 2023, Centene’s Q2 2024 Medicaid enrollment fell 19.5 percent and its quarterly revenues fell by 8.9 percent.  Molina’s Medicaid enrollment increased by 2.2 percent and its quarterly revenues rose by 16.2 percent.  UnitedHealth Group, on the other hand, reported a 5.2 percent increase in quarterly Medicaid revenues despite an 11.6 percent decline in Medicaid enrollment.  Go figure.

A common theme of the Q2 earnings calls and releases was the “timing mismatch” between “higher acuity” in the Medicaid enrollees remaining after the unwinding and the capitation rates that their MCOs are receiving for those populations.  Put another way, the companies believe that the enrollees who lost their Medicaid eligibility due to the unwinding were, on average, healthier than those who retained eligibility and remain enrolled in their MCOs. In the view of the companies, state Medicaid agencies should raise their capitation rates to account for higher-than-projected utilization of services by the remaining less healthy enrollees.  For example:

• Centene: “Gross margin decreased $973 million in the three months ended June 30, 2024, compared to the corresponding period in 2023. … Gross margin decreased due to lower overall membership as a result of the redetermination process, coupled with higher acuity post-redeterminations as we continue to work with our state partners to match rates to the changes in acuity.”
• CVSHealth/Aetna: “The Company’s Medicaid business is experiencing medical cost pressures, largely driven by higher than expected acuity following the resumption of member redeterminations. While the Company continues to work closely with its state partners to ensure the underlying trends are reflected in its premium rates going forward, it is uncertain when these pressures will be fully offset by state rate updates.”
• Molina Healthcare: “…the medical cost profile of members who have been disenrolled is more favorable than the Medicaid segment average….”
• UnitedHealth Group: In explaining the increase in the company’s second quarter medical care ratio, its CEO identified as one factor “the timing mismatch between the current health status of remaining Medicaid members and state rate updates, a timing mismatch we expect to realign in the months ahead.”

Recent estimates from CMS indicate that by the end of June the large majority of states had completed unwinding-related redeterminations for most individuals enrolled in Medicaid as of the start of unwinding in April 2023. Given continually evolving policies and the different cadences at which states have conducted and reported their redeterminations, there is some uncertainty about the conclusion of unwinding in each state. Nonetheless, it seems reasonable to expect that by the end of 2024 the unwinding will no longer drive Medicaid disenrollments for the Big Five.

Whenever the dust settles, the unwinding will have had an effect on the size of each company’s Medicaid footprint and, depending in part on the outcome of negotiations with state Medicaid agencies about rate adjustments, the financial performance of each company’s Medicaid line of business.  These impacts should become clearer when companies report their Q3 and Q4 results.