Elevance Health's 2022 earnings are in, outperforms Wall Street expectations

Most companies on the New York Stock Exchange had a lousy day today, but there was one notable exception: the Big Insurance company currently known as Elevance (previously known as Anthem, which before that was known as WellPoint, which before that was known, more or less, as Blue Cross Blue Shield).  

As I write this, Elevance Health, which reported 4th-quarter and full-year 2022 earnings this morning, is having a stellar day on Wall Street, primarily because investors and financial analysts are applauding the company for beating the Street’s profit expectations, made possible, in large part, by Elevance’s ability to snag a lot more money last year from taxpayers than in 2021. 

When the NYSE closed at 4 p.m. today, Elevance’s stock price was up $17.18 to $495.70 a share, an increase of 3.59% since the market opened this morning. Meanwhile, the S&P 500 and Nasdaq were in the red and the Dow was just barely in the black when the market closed.

Elevance still sells health insurance plans to individuals and employers that are still able to offer subsidized coverage to their workers, but that business hasn’t been growing nearly as fast as its Uncle Sam business, which is now the source of most of its profits. 

The company, which owns Blue Cross Blue Shield plans in 14 states (soon to be 15 if its proposed acquisition of Blue Cross of Louisiana is approved by regulators) said health plan enrollment grew by 2.1 million people during 2022. Considerably more than half of that, however, came from new Medicaid and Medicare Advantage enrollees. 

As regular readers of this newsletter know, Elevance and other big insurers manage most states' Medicaid programs, and Medicare Advantage is the Medicare replacement program operated by private insurers. For most insurers, growth in those taxpayer-funded programs has for years been outstripping the growth in the individual and employer-sponsored market. That’s because Uncle Sam has been and continues to be so carefree with the money we send him to reward Big Insurance’s shareholders.

Profits in Elevance’s government business grew 7.7% between 2021 and 2022, from $3 billion to $3.3 billion. Profits in its much slower-growing commercial book of business increased 6.5%, from $2.8 billion to $2.9 billion. 

Even more impressive was the profit growth in Elevance’s pharmacy benefit management company (PBM), called CarelonRX. Its profits were up nearly 11%, from $1.7 billion in 2021 to $1.9 billion last year. 

Owning a pharmacy middleman like CarelonRX is increasingly important to Big Insurance. UnitedHealth Group’s PBM, OptumRx, is one of the fastest-growing and most profitable components of its operations. Cigna’s PBM, Express Scripts, now contributes far more to the company’s revenues and profits than its health insurance business. And at CVS, its PBM, Caremark, contributes more to overall revenues than either Aetna, which it bought in 2018, or its nearly 10,000 stores.

When contributions from Elevance’s smaller businesses are added to those from its health plan and PBM operations, the company’s total operating profit last year was $8.5 billion, up nearly 13% overall from the $7.5 billion in 2021. 

This is where I get to share with you the kind of stuff I used to write for my CEO when I was an industry flack. Here’s what Elevance CEO Gail K. Boudreaux said in the company’s news release this morning:

“We made considerable progress in our transformation to become a lifetime, trusted health partner in 2022. Through strategic advancements we are making to optimize our health benefits businesses, invest in high growth opportunities, and accelerate capabilities and services, we are delivering on our commitments to our communities and all of our stakeholders."

She went on to remind Wall Street that:

“Last year marked the fifth consecutive year in which we met or exceeded our long-term adjusted earnings per share growth target, and we are well-positioned to do it again in 2023.”

Translation: I’m just reminding you that shareholders continue to be our number one stakeholder.

Fun fact 1: A big chunk of Elevance’s new Medicaid enrollment came through its acquisition last year of a Florida Medicaid company called Simply Healthcare, which in turn bought another Florida Medicaid company called Vivida, which Elevance said added 29,000 Medicaid enrollees. One has to wonder if Earvin “Magic” Johnson was included in the deal. 

Fun fact 2: Enrollment in the Medicare Part D drug plan took a deep dive last year, dropping more than 38%, from 438,000 in 2021 to 271,000 in 2022. That indicates to me that Part D plans are not a part of Elevance’s profitable-growth strategy. There’s more money to be made from Medicare Advantage plans, most of which include a pharmacy benefit, than from Part D. And then there is this not-so-fun fact: The number of people enrolled in traditional Medicare is shrinking as a percentage of all eligible Medicare beneficiaries as Elevance and the rest of Big Insurance focus far more of their efforts on luring Medicare Advantage enrollee into their folds.

Fun fact 3: At the end of NYSE trading on March 23, 2010, when President Barack Obama signed the Patient Protection and Affordable Care Act into law, Elevance’s share price stood at $53.18. At the end of trading on December 8, 2003, when President George W. Bush signed the Medicare Modernization Act–which created Medicare Advantage and Part D–the company’s stock price was $30.48. This afternoon, as I noted, it would cost you $495.70 to buy a share of Elevance’s stock. 

Fun fact 4: Elevance said it used $2.3 billion of its (our) money to buy back shares of its own stock last year, a gimmick big companies use to boost the value of each share, which benefits shareholders (Gail K. Boudreaux being one of the big ones), and that it has board authority to spend $1.9 billion more on stock buybacks.