This is Jacob Everson with the Becker's Payer
Issues podcast.
Here's your biweekly industry news update for February
6.
Moody's has revised its outlook for the health
insurance sector to negative, citing continually high medical
costs that are expected to constrain earnings growth
in 2025.
In a January
reports, analysts
discussed the significant challenges insurers are facing across
their Medicare Advantage, Medicaid, and commercial businesses.
Rising medical costs driven by inflation,
prescription drug spending,
and increased utilization of behavioral health services are
outpacing reimbursement rates and premium increases.
Proposed legislation targeting PBMs and the potential expiration
of ACA premium subsidies in 2026
could also further increase pressures.
Amid these change challenges, Moody's has assigned a
positive outlook to only one major insurer, Hellevance
Health, reflecting its strong market position and operational
performance.
In contrast, Humana and Healthcare Service Corporation have
been given negative outlooks. Humana's negative outlook is
driven by its heavy reliance on Medicare Advantage
and HCSC, which is the parent company of
five Blue Cross plans. They were given a
negative outlook because of their exposure to Medicaid
redeterminations
and competitive pressures within the core commercial business.
Medical costs are rising at their fastest rate
in thirteen years, with commercial group spending projected
to grow by 8% in 2025.
Individual market spend is expected to increase by
seven and a half percent, and MA spending
is forecast to rise by
between somewhere of 57%.
Competitive and regulatory constraints are also limiting the
insurer's ability to offset
rising costs through premium increases.
Medicare Advantage specifically accounted for about 20% of
industry earnings in 2023,
Lower reimbursement rates from CMS and regulatory limits
on benefit reductions
have led to higher medical loss ratios and
lower earnings.
The Inflation Reduction Act has also exacerbated costs
by eliminating the 5% coinsurance requirements for individuals
in the catastrophic phase of prescription drug plans,
which has led to increased utilization
of high cost medications.
And finally, with Medicaid, enrollment did decline in
2024 due to redeterminations,
but the ACA market saw record growth during
the last enrollment period. So Moody's expects overall
enrollment across markets to improve in 2025
with Medicaid stabilizing and MA growth remaining steady.
The potential expiration, though, of ACA subsidies could
lead, though, to significant enrollment declines.
And then there's PBMs facing bipartisan scrutiny.
A proposed federal legislation could require insurers to
divest their pharmacy businesses, which would also potentially
weaken earnings.
On the federal level, members of Elon Musk's
Department of Government Efficiency have been granted access
to the payment and contracting systems at CMS.
Department representatives have been on-site at CMS's offices
this week, which is the week of February
5, examining,
spending
data for potential fraud or waste, and reviewing
the agency's
organization and staffing.
Doge representatives
had not yet been granted access to databases
that include
personal health information of Medicaid and Medicare beneficiaries.
The Doge representatives
have only
read have read only access, meaning they cannot
change any material viewed. President Donald Trump created
the department referred to as DOGE by officials
in November to cut wasteful spending and reduce
operational inefficiencies.
He appointed Elon Musk, who, of course, is
the CEO of Tesla, SpaceX, and Twitter to
lead the initiative.
Doge aims to cut federal spending by $1,000,000,000,000
with Medicaid emerging as a likely target.
On the topic of Medicaid, the Centene is
declaring the redeterminations
era over. On February 4, CEO Sarah London
told investors
the company is anticipating a more stable period
for Medicaid enrollment this year. She said as
we move through 2025,
we're looking forward to turning the page on
the redetermination
era, returning to overall Medicaid stability and working
closely with state partners on innovations to deliver
health care and better health to communities.
In 2023 and 2024,
of course, states determine the eligibility of Medicaid
beneficiaries for the first time since 2020,
which was barred,
in terms of removing beneficiaries during the COVID
public health emergency.
Prior authorization reform is remaining a major advocacy
priority for provider trade groups this year, and
several state lawmakers have also introduced legislation
to bring changes to the process.
The
said the commercial insurers should be held accountable
for ensuring appropriate access
to care, including by reducing the excessive use
of prior auth. The group is also seeking
to reduce administrative burdens that take clinicians away
from the bedside
and contribute to burnout.
The Medical Group Management Association is seeking to
eliminate or significantly reduce the volume of prior
authorization and other prerequisites for coverage.
The AMA and the Federation of American Hospitals
are also both urging Congress to pass the
improving seniors timely access to care act, which
aims to reform the Medicare Advantage
specific
prior authorization
process. That would establish an electronic prior authorization
process for MA plans that includes a standardization
for transactions and clinical attachments
and and some more transparency around how those
prior auth requirements are put to use.
At the state level, lawmakers in Indiana and
Rhode Island have introduced prior authorization reform legislation
just this year alone.
UnitedHealth Group is raising concerns with the SEC
after hedge fund manager Bill Ackman suggested that
the company's profitability could be, quote, massively overstated.
He wrote on x, formerly known as Twitter,
saying, if I still shorted stocks, I would
short UnitedHealthcare.
He suggested that the SEC conduct a thorough
investigation of the company and said, quote, I
would not be surprised that the company's profitability
is massively overstated
due to its denial of medically necessary procedures
and patient care.
He later deleted that post. Mister Ackman is
a billionaire and the founder of hedge fund,
Pershing Square. He has a million and a
half followers on x. A spokesperson for UnitedHealth
told Bloomberg that the company reached out to
the SEC about those comments.
Shares of the company fell 4.3%
on February 5. United said, quote, health insurance
has long been subject to significant regulatory oversight
and earnings caps. And he claims that health
insurers, which typically have low to mid single
digit margins, can somehow over earn or grossly
uninformed about the structure and strong regulatory oversight
of the sector.
And finally, a federal court in Tennessee has
upheld a jury's decision in favor of a
former BCBS of Tennessee employee who filed a
religious discrimination lawsuit after she was terminated for
refusing to comply with the company's COVID nineteen
vaccination mandate.
The judge issued a final ruling on January
31 confirming that Blue Cross must pay the
plaintiff a total of more than $500,000
in damages following a jury's original verdict last
June.
A jury had initially awarded the plaintiff
over $680,000,
but it wasn't in accordance with federal rules
for employers with more than 500 employees,
and so the punitive damages were reduced to
300,000.
The jury had originally found the Blue Cross
had not met its legal obligation to offer
reasonable accommodations
under the Civil Rights Act. It's also part
of a broader litigation against BCBS
of Tennessee with a class action lawsuit filed
by a group of former employees who were
also terminated for refusing the vaccine on religious
grounds. The company terminated 41 employees who had
requested
religious exemptions,
for a mandate that affected 900
customer facing roles.
It's also part of a larger trend because
back in November, a federal jury ordered Blue
Cross Blue Shield of Michigan to pay nearly
$13,000,000
in damages to a former employee who said
she was wrongfully terminated
for refusing to receive the COVID vaccine back
during the pandemic.
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