Elevance's Q2 profits make Wall Street investors (and company executives) happy and wealthy

Elevance, the big for-profit health insurer previously known as Anthem, wowed Wall Street yesterday when it announced that it spent less on patient care during the second quarter of this year than investors had anticipated. 

The company’s financials were so unexpectedly positive that executives said Elevance is on track to make more in profits this year than they had thought possible just a few months ago.

Coincidentally, Elevance’s earnings report came the day after CNBC and other outlets reported on research showing that it now takes an income of $652,657 for someone in America to be considered in the top 1%. CNBC noted that:

Nationally, households making $657,657 or more are considered among the top 1%--nearly eight times the median household income, which is about $75,000, according to the study. 

As you read below about Elevance’s impressive profits, keep in mind that the executive quoted in the company’s press release, CEO Gail Boudreaux, pulled in $24 million last year. That’s 36.5 times what it takes to land in the top 1% these days–and 320 times the median household income in this country. It’s also 383 times the median pay of Elevance employees, which was $54,627 in 2022. Of the seven biggest for-profit insurers, Elevance has the distinction of being the one with the greatest disparity in pay between the CEO and rank-and-file workers. 

Also keep in mind that most of Elevance’s “profitable growth” is coming from taxes we pay to provide the poorest among us–and our senior and disabled citizens–with access to the care many of them need to draw their next breath.

Elevance’s operating revenues grew by 12.7%, from $38.5 billion in the second quarter of 2022 to $43.7 billion in the quarter that ended on June 30. 

Its profits last quarter were equally pleasing to Wall Street, up 12% to $2.6 billion from $2.3 billion in Q2 2022. So far this year, the company’s profits are up 14.4% over the first six months of 2022, from $4.8 billion to $5.5 billion.

Here’s what Boudreaux said about her company’s performance:

Our solid execution and continued progress of our strategy to become a lifetime trusted health partner resulted in strong second quarter and first half results. Our focused efforts to optimize our mature businesses, invest in high-growth opportunities, and accelerate our growth through Carelon to meet the whole health needs of consumers positions us well for the rest of 2023 and beyond. 

Circumventing the Affordable Care Act

If Carelon doesn’t ring a bell, it’s because it didn’t exist as a division of the company until last year when executives announced its christening at the same time the company changed its name to Elevance. Boudreaux and crew created Carelon to encompass CarelonRx (previously known as IngenioRx) – its pharmacy benefit management company (PBM) – and the health care delivery businesses it has bought in recent years. 

Carelon’s revenues increased by 18.4% over the same period last year, from $10 billion to nearly $12 billion.

Like its biggest competitors – UnitedHealth, Cigna, and CVS/Aetna – Elevance is now structured in a way that lets it pay itself whenever health plan enrollees get their medications through CarelonRx or see health care providers in medical practices Elevance owns, like the recently acquired behavioral health company Beacon Health Options.

When these companies pay themselves that way, it enables them to circumvent the intent of Congress when it included a provision in the Affordable Care Act to require insurers to use at least 80-85% of revenues on patient care. When the ACA was passed in 2010, big insurers for the most part were just that, big insurers. Since then, most of them have been on an acquisition binge, buying provider groups and clinics left and right and sucking enormous sums of money out of the pharmacy supply chain through their PBMs.

During the second quarter of this year, Elevance spent less as a percentage of revenue on patient care than it did in the second quarter of 2022, dropping from 87.1% to 86.4%. That was especially good news from an investor’s point of view and was even slightly better than the 86.95% Wall Street financial analysts had expected.

Growth at the expense of taxpayers

The number of people enrolled in Elevance’s health plans grew by 2% over the past year, but almost all of that growth came through enrollment gains in the Medicare Advantage plans it owns and the Medicaid programs it operates for several states.

Enrollment in the company’s individual and employer-sponsored plans grew just .8% over the past year. Had it not been for growth in its individual business – primarily through health plans offered in the state marketplaces created by the ACA – the company would have posted a significant decline in its private-sector enrollment.

Enrollment in Elevance’s risk-based employer-sponsored plans fell by 6.3%, the latest indication that employers are being priced out of the market because of relentless premium increases. As the company noted, much of its profits came as a result of the premium hikes it imposed on employers and individuals.

Elevance and other big insurers also get checks from the federal government to cover millions of Americans enrolled in ACA marketplace plans. The feds send billions of dollars to Elevance and other insurers to subsidize the cost of premiums for people enrolled in ACA marketplace (Obamacare) plans. Very few people enrolled in those plans could afford coverage without taxpayers pitching in.

Here’s how the company explained its impressive revenue growth:

Operating revenue was $43.4 billion in the second quarter of 2023, an increase of $4.9 billion, or 12.7 percent year-over-year. The increase was primarily driven by premium rate increases in our Health Benefits business and higher premium revenue due to membership growth in Medicaid and Medicare. (Emphasis added.) The increase in operating revenue was further attributable to growth in pharmacy product revenue within CarelonRx driven by growth in external pharmacy members served and the acquisition of BioPlus (a specialty pharmacy business) in the first quarter of 2023.

Wall Street was especially pleased to see the robust growth in enrollment in Elevance’s Medicare and Medicaid businesses. Enrollment in the company’s Medicare Advantage plans was up 5.8% while enrollment in the Medicaid plans it operates for several states increased 5.2%.

Much of the increase in Elevance’s Medicaid enrollment came through an acquisition it made last year that expanded its control of the Medicaid program in Ohio. The ink wasn’t even dry when Elevance began hardball negotiations with Bon Secours Mercy Health, a big hospital system in Ohio and other states. On July 1, Anthem booted BSMH out of network, meaning that Medicaid enrollees in the state who get care from a BSMH facility could be on the hook for substantial out-of-network out-of-pocket requirements.

I’ll write more about that in the coming weeks and how it is affecting the poorest people in Ohio–and also about a brand new report showing that Elevance and other insurers that manage states’ Medicaid programs are denying coverage for poor people’s medical care at alarming rates.

Meanwhile, Anthem’s shareholders–including Gail Boudreaux–are considerably richer today. Investors snapped up shares of the company’s stock yesterday, pushing the share price up 4.4% to $463.21 on a day in which the Dow, S&P 500, and Nasdaq were all in negative territory. Elevance’s stock price has jumped 8.5% since June 20, with most of that increase coming on the heels of the company’s second-quarter earnings.

Another reason for investors’ joy: Elevance said it has spent $1.3 billion since the first of the year to buy back shares of its own stock, a gimmick that rewards shareholders and top executives by increasing earnings per share.

It turns out that denying coverage for millions of our poor, disabled, and elderly citizens is a surefire way to ensure your place at the pinnacle of income in America.