Health Plan Weekly

CVS Touts Aetna’s Contribution; Molina Exchange Business Stumbles

February 20, 2020

During a Feb. 12 presentation outlining its 2019 financial results, CVS Health Corp. touted a “successful first full year with Aetna,” saying the transaction produced “synergies above expectations” at approximately $500 million. And CVS’s Health Benefits segment posted a “solid” fourth quarter, in the words of Citi Research securities analyst Ralph Giacobbe.

By Leslie Small

During a Feb. 12 presentation outlining its 2019 financial results, CVS Health Corp. touted a “successful first full year with Aetna,” saying the transaction produced “synergies above expectations” at approximately $500 million. And CVS’s Health Benefits segment posted a “solid” fourth quarter, in the words of Citi Research securities analyst Ralph Giacobbe.

Across its enterprise in 2019, CVS delivered adjusted earnings per share (EPS) of $7.08 with total revenues of nearly $257 billion — a 32% year-over-year increase, CEO Larry Merlo told investors during the company’s earnings call, per a transcript of the call published by the Motley Fool.

For the fourth quarter of 2019, CVS reported an EPS of $1.73, topping the consensus estimate of $1.68. Giacobbe noted that revenue “was particularly better” in CVS’s PBM segment.

For Molina Healthcare Inc., the firm “was perhaps a victim of its own success” in the fourth quarter of 2019, Jefferies analysts David Windley and David Styblo advised investors on Feb. 12. The company’s management “has executed the turnaround story so well that we and others expected the ’20 HIX [health insurance exchange] pivot to land gently as well,” they wrote. Instead, that business segment missed its earnings target by roughly $75 million, the Jefferies analysts advised.

Molina’s Affordable Care Act exchange “pivot” involved the insurer lowering its prices in a bid to increase enrollment, Windley and Styblo explained. However, Molina’s lower prices “weren’t, by themselves, enticing enough,” they wrote. “With lower pricing, standard broker expenses, and an infrastructure built for larger membership, ’20 margins get squeezed by 550 [basis points], or 53%, leading to the 50% profit decline.”

However, Molina’s two pending acquisitions — a $40 million deal to buy New York Medicaid insurer YourCare HealthPlan and a $50 million deal to add Illinois-based NextLevel Health Partners — “present upside,” the analysts advised.

If Lawmakers Can Compromise, Surprise Billing Fix Could Arrive by May

February 18, 2020

Legislation to protect patients against surprise medical bills is once again gaining momentum in Congress, with two key House committees voting to advance proposals. However, passage of competing bills by the House Education and Labor Committee and the House Ways and Means Committee also emphasized the policy divide between lawmakers and stakeholders on the main sticking point: how to decide rates for out-of-network providers.

By Jane Anderson

Legislation to protect patients against surprise medical bills is once again gaining momentum in Congress, with two key House committees voting to advance proposals. However, passage of competing bills by the House Education and Labor Committee and the House Ways and Means Committee also emphasized the policy divide between lawmakers and stakeholders on the main sticking point: how to decide rates for out-of-network providers.

Education and Labor, which approved its bill on Feb. 11 with a bipartisan majority, would set payments for providers by basing them on regional benchmarks, while still giving providers the option of going to arbitration for bills higher than $750. Ways and Means, meanwhile, backed mediation between insurers and providers to set rates, again on a bipartisan vote. That panel also threw in a new twist: a provision designed to rein in private equity firms that have purchased physician practices.

Some policy analysts say the two camps are not as far apart as they might appear, and could rally to negotiate a compromise, particularly since this issue is on the radar of many election-year voters. “Maybe I’m being overly optimistic, but I still think there’s a good chance something gets done before the late May deadline they set for themselves,” says Loren Adler, an associate director of the USC-Brookings Schaeffer Initiative for Health Policy who has studied surprise billing.

Most surprise billing proposals would hold consumers harmless by prohibiting balance billing — when an out-of-network provider sends a patient an invoice for the difference between what they’re charging and what an insurer will pay, according to an issue brief from the American Academy of Actuaries. The proposals also would base patients’ out-of-pocket costs on in-network cost-sharing requirements for services provided at an in-network facility. But the point of contention is how to determine what providers get paid in those situations.

The Ways and Means Committee’s mediation/arbitration approach won some praise from provider groups, including the American Medical Association. Provider groups have been heavily lobbying Congress for such an approach. Meanwhile, the Coalition Against Surprise Medical Billing, which represents major health insurers and business groups, favors a benchmark approach “based on local, competitive market-based rates.”

“I don’t know whether providers or insurers will prevail on this issue, since both have very strong stances,” Caroline Pearson, a senior fellow at NORC at the University of Chicago, tells AIS Health. “The most likely scenario could be a middle-ground approach that sets payment rates for some threshold of services and uses arbitration more selectively.”

Official Deems Debut of Nevada’s State-Based Exchange a Success

February 13, 2020

Nevada — the proverbial guinea pig among a host of states aiming to shift from the federal Affordable Care Act (ACA) exchange platform to their own state-run exchange — now has completed its first full open enrollment period independent from HealthCare.gov.

By Leslie Small

Nevada — the proverbial guinea pig among a host of states aiming to shift from the federal Affordable Care Act (ACA) exchange platform to their own state-run exchange — now has completed its first full open enrollment period independent from HealthCare.gov.

Heather Korbulic, the executive director of the Silver State Health Insurance Exchange, told AIS Health before open enrollment kicked off that to her, a successful transition would look like “we landed the plane — we got all of our consumers successfully migrated, we were able to work with enrollment professionals and the technology worked, and we could at least retain the enrollment that we had from previous years.”

In January, AIS Health caught up with Korbulic to ask how the new state-based exchange fared during open enrollment that ran from Nov. 1 to Dec. 15, based on the parameters she outlined. So what’s the verdict? “Using those metrics…I would say that we could call this a success,” she says.

For one thing, her agency was able to migrate consumers’ data, as well as the data regarding their relationships with insurance brokers and agents, from HealthCare.gov to the new state platform — a task Korbulic previously described as “very complicated.”

During open enrollment, Nevada’s health plan selections totaled 77,410, according to Korbulic. That’s higher than the 65,563 active plan enrollments that the state migrated from HealthCare.gov in late October, but lower than the 83,449 plan selections during the open enrollment period for 2019 coverage (an unsurprising disparity as some who initially enroll in plans inevitably will drop coverage or never effectuate it).

Korbulic cautions against comparing the open enrollment signup totals for 2019 and 2020, as “we’ve never really had the actual insight in our data that would allow us to confirm or to feel…comfortable with the numbers that CMS puts out.” Instead, “I think this 77,000 number is truly reflective of where Nevada is with our new baseline, and it’s what to measure us from, from here on out,” she says.

Centene, Humana Join Anthem in 4Q MLR Misses

February 11, 2020

Health insurers continued to struggle with their medical loss ratios in the fourth quarter of 2019, with Humana Inc. and Centene Corp. each posting MLRs that missed analysts’ expectations and indicated higher medical expenses in specific segments. Centene joined Anthem, Inc., in blaming costs from an early flu season in part for its elevated MLR, while Humana tagged shifts in its Medicare business for its own raised MLR. Anthem reported its earnings on Jan. 29.

By Jane Anderson

Health insurers continued to struggle with their medical loss ratios in the fourth quarter of 2019, with Humana Inc. and Centene Corp. each posting MLRs that missed analysts’ expectations and indicated higher medical expenses in specific segments. Centene joined Anthem, Inc., in blaming costs from an early flu season in part for its elevated MLR, while Humana tagged shifts in its Medicare business for its own raised MLR. Anthem reported its earnings on Jan. 29.

Though Centene’s earnings per share figure was in line with expectations, the insurer’s full-year 2019 MLR was higher than expected: 87.3% versus the company’s guidance range of 86.6% to 87.1%. “Based on our interpretation of the release, higher HIX [health insurance exchange costs] contributed most of the shortfall while flu costs were ‘slightly higher than projected,’” Jefferies analyst David Windley said in a Feb. 4 investor note.

Jeff Schwaneke, Centene’s executive vice president and chief financial officer, said during the company’s Feb. 4 conference call that MLR varies from quarter to quarter based on members’ out-of-pocket expenses. “The last quarter in the year tends to be higher, because the maximum out-of-pockets have been met and sometimes people try to get some services and other things done,” Schwaneke said.

Humana reported “lower-quality” fourth-quarter earnings results, with a higher MLR even though the insurer beat analysts’ expected earnings per share, Citi analyst Ralph Giacobbe said in a Feb. 5 investor note. The insurer earned $16.3 million in revenue during the fourth quarter and $64.9 million for 2019 overall, increases of 15% for the quarter and 14% for the full year.

Still, Humana’s MLR came in at 86.6%, when analysts had anticipated an MLR of 85.6%. This continued the underperformance in MLR that troubled Humana throughout the year, said Evercore ISI analyst Michael Newshel in a Feb. 5 investor note.

“The key retail MLR was slightly above [consensus] though still ended the year at the low end of full-year guidance,” Newshel said, adding that Humana officials blamed business that shifted to Medicare Advantage from Medicare Part D, which has a seasonally much lower MLR in the fourth quarter.

ACA Exchange Draft Regulation Drops — Later Than Insurers Would’ve Liked

February 6, 2020

On Jan. 31, CMS released the 2021 Notice of Benefit and Payment Parameters (NBPP), which is the annual omnibus regulation that outlines the rules of the game for Affordable Care Act (ACA) exchange plans. But that was only after a trade group for safety-net health plans sent a strongly worded letter warning the Trump administration that the clock is ticking for issuers to finalize their 2021 premiums and benefit designs.

By Leslie Small

On Jan. 31, CMS released the 2021 Notice of Benefit and Payment Parameters (NBPP), which is the annual omnibus regulation that outlines the rules of the game for Affordable Care Act (ACA) exchange plans. But that was only after a trade group for safety-net health plans sent a strongly worded letter warning the Trump administration that the clock is ticking for issuers to finalize their 2021 premiums and benefit designs.

In its Jan. 27 letter, the Association for Community Affiliated Plans (ACAP) complained to CMS that the proposed 2021 NBPP “appears to be stalled at the Office of Management and Budget.” (The OMB completed its review of the regulation on Jan. 29.) Insurers need to submit qualified health plan (QHP) applications starting in early May, ACAP pointed out. “Building in a minimum 30-day comment period in addition to 30 days for the Department to review, revise, and release the final [rule] would allow just one month for issuers to operationalize and implement necessary updates,” the group wrote. “This timeframe will not allow issuers sufficient time to prepare products and operations for Benefit Year 2021.”

Fritz Busch, an actuary with Milliman Inc., tells AIS Health that the final NBPP has come out in April during the past two years, but before that arrived much earlier. The delay of the NBPP “presents operational challenges for a lot of plans, because so many plans are right in the middle of doing their pricing and other planning for the year,” he adds.

As for the content of the draft NBPP, the most attention-grabbing proposed changes to the rules surrounding subsidy eligibility. CMS said it’s seeking public comment on “new automatic re-enrollment processes for enrollees whose share of the premium after applying premium subsidies is $0, in order to reduce the risk of incorrect expenditures on subsidies that cannot be recovered through reconciliation.” In addition, “periodic data matching standards would be amended to help ensure premium subsidies are not inappropriately paid to enrollees who are determined to be deceased, or dually eligible for Medicare.”