- GLP ones, Medicare Advantage Headwinds, a Medicaid landscape
- that looks different
- every quarter.
- Their leadership right now means making durable decisions
- in an environment that keeps moving, and the
- organizations pulling ahead are the ones that stopped
- waiting for stability
- before acting.
- Becker's fifth annual fall payer issues roundtable convenes
- more than 500
- executive level attendees
- and 70 plus speakers November second and third
- at the Swiss Hotel Chicago.
- Two days of senior level dialogue on affordability,
- benefit design, value based care, and the strategies
- shaping how care gets financed
- and delivered, featuring a celebrity keynote from pro
- football hall of famer, Emmitt Smith. Agenda and
- registration at beckerspayer.com.
- Click events in the upper right.
- This is Scott Becker with the Becker's Health
- Care podcast.
- We're joined today by Jacob Emerson. Jacob comes
- to us regularly to talk to us about
- the payer trends, payer stories that he's watched
- in the markets.
- Jacob, let me tee you up and have
- you take it away.
- What what's what are you watching currently?
- Sure thing, Scott. Good to talk with you.
- So I got
- two broad topics we could talk about today
- are some themes we're seeing from the second
- quarter earnings calls that are now mostly out
- for the large hospital operators,
- and then the largest health insurers. There there's,
- I think CVS is the only one left
- at this point in terms of q two
- earnings, so so they're the outlier there. We've
- got earnings out now from from HCA,
- tenants, CHS, UHS,
- and then across the big payers.
- And I think, you know, two big topics
- that I spotted right away,
- after looking through everybody's
- calls and financial results for the quarter is
- that the, the expiration of the ACA subsidies,
- the enhanced subsidies at the end of last
- year,
- it seems like it's really favoring insurers or
- at least they've they've better managed some of
- the some of the fallout there. And then
- the hospitals themselves
- really seen, a big financial impact from from
- the fallout there. And then the other story
- is, on the on the payer side is
- the Medicare Advantage margin recovery.
- After the last eighteen to twenty four months
- of pretty tough a pretty tough business to
- navigate for the insurers.
- They're on the upswing again, and, that's likely
- because of a lot of the moves we've
- saw them be making over the last couple
- years. So I can dive into that as
- well.
- Thank you so much. And talk about like,
- I saw Centene's earnings not Centene's.
- Oscar Health's earnings were way up, and they're
- a Medicare Advantage provider,
- you you know, or or ACA,
- you know, it it they trim their ACA
- business and their profits went way up.
- And then so a tenant also
- recorded a really good quarter,
- you know, notwithstanding all the discussion of the
- ACA and everything else. And I saw HCA
- had talked somewhat negatively about their earnings, but
- at the end of the day, even though
- they took a hit on the ACA business,
- their overall business seems to be going fantastically
- well.
- Give us some of the takes that you
- have in watching this. What what are you
- seeing out there?
- For sure. And, I think Scott Oscar's gonna
- come out later next month in August, but
- Centene,
- the big ACA operator, did have their earnings
- this week. So I can dive into that
- in just a sec, but,
- or actually right now because
- I can talk about some of the ACA
- subsidy fallout. I think what's interesting
- is that,
- the the the large health systems, they're they're
- absorbing
- a bigger wave
- of newly uninsured patients
- than they than they originally expected earlier this
- year. And so,
- you know, everybody
- knew that,
- the enhanced
- credits that lowered the exchange premiums for millions
- of enrollees,
- and they lapsed at the end of, last
- year after congress failed to extend them. And
- I think it's interesting that, you know, insurers
- had anticipated the expiration or at least they
- had
- planned around it. So a lot of them
- filed two different sets of rates with states
- going into this year.
- And so the insurers were able to raise
- their premiums,
- in part around the assumption that
- when or if the the subsidies expired
- and and premiums went up for millions of
- people that people who are healthier who,
- you know, in theory don't need health insurance.
- I'm not saying that people don't, but people
- who felt that they could go without it,
- that they would face sticker shock on the
- premiums and they would drop coverage.
- And so originally,
- a health system like HCA, they had thought
- that around eighty to eighty five percent of
- those types of individuals,
- they they would just become uninsured and that
- the other fifteen percent would find coverage elsewhere.
- But it ended up being those assumptions were
- wrong, and it ended up being that almost
- a 100% of those people ended up not
- getting coverage elsewhere either through Medicaid or through
- an an employer.
- And and that theme was consistent across,
- CHS, Tenet,
- Universal, UHS, which is more behavioral hospitals. So,
- basically,
- more in So how do you, though, how
- do you filter this out? Because you're absolutely
- right. I'm I'm looking at the things that
- you're looking at and seeing that they essentially
- said people lost coverage.
- They're still getting hospital care and and health
- care, but we're just not getting paid for
- it as we were getting paid at least
- somewhat under the ACA plans.
- Yep. So this is a drag on their
- margins and outlook. But at the same time,
- overall,
- the earnings for a lot of these
- big health systems seem to be pretty solid,
- at least the for profit ones.
- Sure. And, I mean, I think that's reflects
- their their ability to,
- absorb or pad margins elsewhere. I mean, I
- know Tennant mentioned their ambulatory surgery mix,
- that was able to help absorb the hit,
- for them based off of planning that they
- did, in the middle of of last year.
- So I think, you know, for a lot
- of these systems overall, they're able to either
- make it up elsewhere, but also I think
- you have to remember that
- just in the wide market context,
- this year, there's only 19,000,000 ACA exchange enrollees.
- That's that's pretty minuscule compared to, you know,
- the the over a 100,000,000 people that are
- enrolled in employer based plans,
- you know, the
- tens of millions that are enrolled in Medicare
- Advantage Plans. So
- just we're just talking about tenant alone. I
- think exchange patients made up only about five
- and a half percent of the system's
- overall revenue.
- So I think that's also why
- this is it didn't hit the systems as
- as as hard as, you know, it it
- could have. But let me ask you this
- question. This is what I'm trying to understand
- a little bit. Yeah. You said it really
- well right there that out of hundreds of
- millions of patients, it's only 19,000,000
- that were in these types of exchanges or
- something like that.
- Mhmm. Tenants got a lot of outpatient and
- so not nearly as affected,
- and, ultimately, you had a really good quarter.
- Their stock was way up yesterday.
- HCA is down about 11%
- year to date,
- but HCA sort of,
- you know, went pretty hard in the press
- conference earnings release
- about how struggling and difficult this ACA headwinds
- are.
- And is that political positioning
- given that it's ultimately a relatively small percent
- of their entire business?
- Or or is that, you know, is that
- real or is that political positioning? How do
- you sort of guide through that? And and,
- you know, and I don't know if you
- have if you have an opinion on that.
- Maybe it's both. I mean, I think what
- what, you know, what's,
- for profit business is going to willingly not
- advocate for more insured
- patients
- overall,
- and and whatever policy supports that.
- But I also think if you look at
- HCA's numbers specifically, I mean, they they think
- that the the ACA hit to their payer
- mix is gonna hit somewhere between a billion
- and 1,200,000,000,
- over the course of this entire year, Scott,
- and that's up from around 600 to 900,000,000
- just earlier this this this year. So, you
- know, just doing the math there, that's roughly
- $400,000,000
- difference
- if if the on the higher end of
- those projections. I mean, $400,000,000
- for for any organization, it's a lot of
- money. So,
- I think it's a mixture. I mean, they're
- overall, they're gonna they're gonna want,
- these these subs these enhanced subsidy policies in
- place,
- or just more policies that support ACA enrollment
- because that means more commercially insured
- patients.
- But on the flip side, in the grand
- scheme of their entire organizations,
- it is on in the singular percentage of
- of making up the entire revenue for sure.
- So I think Right. When when when I
- look at this online, it it essentially says,
- you know, that
- adjusted
- EBIT outlook for the year for HCA.
- And I'm not saying that these companies are
- crying wolf,
- but their adjusted EBITDA
- projection for the year is $15,500,000,000,
- 15,400,000,000
- to 16,100,000,000.
- I mean, they do say, yes, more uninsured
- patients,
- fewer elective surgeries,
- pressure from changes in the Affordable Care Act.
- You know? But at the same time,
- that 400,000,000, you're absolutely right. It's a lot
- of money,
- but this is a a company with net
- profit of 6 to $7,000,000,000,
- adjusted EBITDA when you add back interest depreciation
- of 15,500,000,000
- or so. Is that I so I do
- like I I hear you and I hear
- them in saying this is gonna negatively impact
- their profits,
- but it is also hard
- to be too empathetic
- when essentially
- they still got able to have 15,000,000,000 plus
- a year.
- And so I do look at this little
- bit great compliment.
- As as a fear
- point that the profits are down a little
- bit, but it it it it does seem
- like a little bit of political advocacy, a
- little bit of everything else when they're still
- so incredibly profitable, which is not bad. It
- just is what it is.
- Yeah. No. I I completely agree with you.
- And I I have seen some also some
- interesting commentary out there from analysts saying that
- one effect though that this could have overall
- on on the market is, you know, you've
- got these uninsured patients, more of them coming
- into these systems seeking care. They can't turn
- them away in an in an emergency setting.
- Right now, in the past, it's been that,
- you know, if you do cash pay, you're
- you're probably paying less than,
- what you what you might pay,
- under on a under a commercial plan or
- what the or what the payer pays in
- the hospital.
- But that might change as these hospitals do
- still wanna make up those those lost margins.
- With the with this ACA hit, the cash
- pay prices might rise,
- to to equal, commercial payments. I'm not saying
- that's gonna happen, but I've seen some analysts
- talk about,
- that the that the cash pay discounts
- of of of current of of the past
- might be something that that could be on
- the chopping block moving forward for a lot
- of health systems.
- No. Fascinating. Fascinating. So tell us on the
- payers side. I must have misread the Oscar
- health stuff. Maybe the Oscar health
- rose
- based on the Centene earnings announcement. Yeah. Tell
- me what's going on with some of the
- payers there. You know, and I think you
- you're probably correct there because Centene did have
- a good quarter,
- and they've, I mean, they've completely turned things
- around, especially compared to last year that had
- over $250,000,000
- loss in the same quarter last year, and
- then they recorded,
- over $1,000,000,000
- in profit this year. And I think that's
- all really coming from,
- targeted reductions in,
- partially in that in that ACA business. And
- their CEO talked about it,
- yesterday on the earnings call, basically saying that
- their their internal actuaries saw what could be
- coming down the pipeline with just the expired
- subsidies alone, and so they prepared different sets
- of rates. They refiled quickly with the states,
- to make sure that the basically, their plans
- were priced correctly on the ACA.
- The basically, the premiums were were higher
- to make up for the loss of I
- think it's close to 2,000,000 people or around
- that,
- that that they've lost just in the marketplace.
- But that all being said, their their margin,
- they she boosted the margin, for the marketplace
- business, for 2026.
- So even though they've lost millions of of
- exchange members, it's actually helped their their profit
- margin in that business,
- because they were able to raise premiums,
- ahead of time last year.
- So so that's kind of why they They're
- they're losing some of that business, but they're
- doing better business. And this is part of
- how a lot of these different, plans
- moved away from Medicare Advantage, moved away some
- of the things where they weren't as profitable.
- So it's a loss to the consumer,
- but the insurers seem to do okay.
- Yeah. Exactly. And it's a it's a similar
- story playing out. I mean, obviously, a completely
- different market, but it's a similar story playing
- out with Medicare Advantage. They're really all focused
- on margin recovery right now, and it it
- is a multiyear rebuild everywhere across across the
- biggest companies. We had Humana come out today,
- saying that their individual
- Medicare Advantage pretax margin should double this year
- excluding STARS headwinds, which is a bit of
- a wild card right now across the entire
- industry
- given the the mess that that is between
- the insurers and the government.
- But it's the same same story arc with
- with UnitedHealth, with Ellevance,
- all trying to rebuild margins in that business
- mostly going into next year.
- And and, we're seeing a lot of targeted
- exits. So that's either leaving markets entirely or
- it's dropping, you know, like PPPO ends and
- hoping to
- shuttle members into HMO or or,
- narrower networks.
- So, basically, overall, Elavance, United,
- Elavance did it last year. United is, dropping
- millions of members this year. Humana just announced
- today they're gonna drop 600,000
- members through targeted exits. So similar story. They're
- trying to basically shed
- more expensive membership,
- to preserve the margin overall, which really contrasts
- with
- the decade before this, which was growth, I
- think, at all costs, Scott. So that's the
- story. His his margin recovery continues for Medicare
- Advantage.
- Best thing to watch. So in terms of
- the big hospitals and health systems,
- some of them taking a bigger hit than
- others based on some of the ACA subsidies
- not being in place
- and and people leaving ACA subsidies and being
- uninsured.
- But in the big scheme of things, at
- least the for profit health systems
- doing pretty well.
- Yeah. The payers
- being much more targeted in their approach to
- what markets they're in and also notwithstanding
- the changes in the ACA, the changes in
- some of the Medicare Advantage,
- also doing pretty well.
- Yeah. And that all ties back to, with
- Medicare Advantage, that all ties back to affecting
- the hospitals, Scott, with much tougher contract renegotiation
- cycles with MA plans, you know, tougher
- utilization policies in terms of
- prior auth, clawbacks,
- audits,
- tougher reimbursement policies,
- and really stretching the limits of what CMS
- allows between traditional Medicare and MA. We've seen
- a lot of big lawsuits filed recently by
- big health systems over MA reimbursement policies. So
- the the health systems, I think, are really
- feeling this margin recovery from the payers and
- and trying to get paid,
- for for the MA patients that they serve.
- And then, of course,
- we we've we've certainly covered that trend that's
- been going on across the country as well
- and some of those contract tensions.
- Truly fascinating.
- Jacob, as always, I learn more when I
- talk to you than when I talk to
- almost anybody. I greatly appreciate it. I hope
- our audience feels the same and learns a
- lot too. Again,
- lots of ACA subsidy overhangs as people move
- out of the ACA market,
- and become uninsured.
- The big for profit seem to manage this
- really well even though they may whine about
- it a lot. This is my perspective, my
- talking, not Jacob.
- The not for profits have a harder time
- because often their payer mixes are tougher than
- some of the for profits that really position
- the markets.
- The insurance companies also
- seemingly,
- for all the complaining, just step away from
- that line of business, which wasn't that profitable
- for them and seemed to be doing okay
- with some of these changes.
- Yeah. Definitely. I think a good way to
- summarize it, Scott.
- Jacob, absolutely fascinating. Thank you for joining us
- today on the Becker's Healthcare podcast. Thank you
- very, very much.
- Always good to talk with you. Thank you.