First half of 2023: 7 big health insurers pulled in $683 billion in revenues – largely through taxpayer-supported programs and the pharmacy supply chain

But that wasn't enough to please Wall Street.

If you run a publicly traded health insurance company in America, you simply cannot raise premiums fast enough–or deny nearly enough claims or treatment requests–to keep Wall Street happy. 

Consider this: 

• While more than 100 million Americans are now saddled with medical debt, health insurance companies are awash in cash. 

• During the first six months of this year, the seven big for-profit health insurers alone made more than $40 billion in profits on revenues that exceeded two-thirds of a trillion dollars. 

• Collectively, their profits for the first half of 2023 were up 8.1% compared to the same period last year. Their revenues were up nearly 11%. 

Yet despite those impressive gains, Wall Street is not pleased with any of them. Investors clearly think the companies didn’t increase premiums enough to cover an anticipated increase in demand this year for care delayed by the pandemic and have been paying too many claims. 

Watch my video analysis below:

The evidence of their dissatisfaction is the billions of dollars in the companies’ market capitalization that have vanished since the first of the year as shareholders have shifted their money to companies they think can give them a better return on their investments. 

Wall Street’s unhappiness goes a long way toward explaining the double-digit premium increases many American employers and families will be hit with come January 1, 2024. It also helps explain why many of the insurers are using AI and other means to deny coverage for needed care and reject legitimate claims en masse, and why some of them–Elevance in particular–are in protracted contract disputes with hospitals.

As a group, the companies (Centene, Cigna, CVS/Aetna, Elevance/Anthem, Humana, Molina and UnitedHealth Group) saw their total revenues increase from $618.2 billion in the first half of 2022 to $683.8 billion during the same period this year.

Their profits, meanwhile, grew from $37 billion to $40.2 billion. 

But that just wasn’t nearly good enough for Wall Street investors, who have shifted billions of dollars out of the sector during the first eight months of this year. As a consequence, the stock price of all the companies is considerably lower today than it was on January 3, 2023, the first day of trading on the New York Stock Exchange this year–in some cases, far lower. 

As of September 1, 2023:

• Molina’s shares were down 2.7% from $318.92 on January 3 to $310.44 on September 1.

• Humana’s shares were down 7.6%, from $498.58 to $460.61.

• UnitedHealth Group’s shares were down 7.9%, from $514.69 to $474.24.

• Elevances’s shares were down 11.4%, from $499.00 to $442.38.

• Cigna’s shares were down 13.2%, from $318.61 to $276.67.

As bad as that is for those companies and their shareholders, consider this: 

• Centene’s shares were down 23.2%, from $79.74 to $61.27.

• CVS/Aetna’s shares were down a whopping 27.7%, from $90.78 to $65.67.

By comparison:

• The Dow was up 5.1%, from $33,136.37 to $34,837.71.

• The S&P was up 18.1%, from $3,824.14 to $4,515.77.

• The Nasdaq was up 35.1%, from $10,386.98 to $14,031.81.

It’s not that the companies aren’t growing. It’s just that at least some of that growth has not been as profitable as Wall Street demands. 

Most of them saw a slight uptick in enrollment in their commercial (individual and employer) health plans. 

• Cigna reported an increase of nearly 9% in commercial health plan enrollment, from 14.7 million to 16 million. 

• CVS/Aetna reported a 6.8% increase, from 17 million to 18 million. 

• UnitedHealth reported a 2.6% increase, from 26.5 million to 27.2 million. 

• Centene reported the biggest percentage increase–50%–from 2.5 million to 3.7 million (exclusively from gains in the taxpayer-subsidized Obamacare marketplace).

But as has been the case for the past few years, most of the companies’ growth continues to come from the taxpayer-financed Medicare and Medicaid programs.

• UnitedHealth’s Medicare Advantage enrollment increased by 10%, from 6.9 million to 7.6 million; its Medicaid enrollment increased by 5%, from 8 million to 8.4 million.

• Cigna’s Medicare Advantage enrollment increased by 9%, from 544,000 to 592,000.

• CVS/Aetna’s Medicare Advantage enrollment increased by 5.3%, from 3.2 million to 3.4 million.

• Elevance’s Medicare Advantage enrollment increased by 5.8%, from 1.9 million to slightly more than 2 million; its Medicaid enrollment increased by 5.2%, from 11.2 million to 11.8 million.

• Humana’s Medicare Advantage enrollment increased by 12.9%, from 5.1 million to 5.8 million; its Medicaid enrollment increased by 26.3% from 1 million to 1.3 million (Humana announced earlier this year it is exiting the commercial market).

• Centene reported a dip in Medicare Advantage enrollment, from 1.5 million to 1.3 million, but its Medicaid enrollment increased by 7.4%, from 15.4 million to 16.1 million.

• Molina’s Medicare Advantage enrollment increased by 10%, from 151,000 to 166,000 while its Medicaid enrollment increased by 6.8%, from 4.6 million to 4.7 million.

The problem, though, is that most of the companies paid more in claims than Wall Street apparently found acceptable. CVS/Aetna, for example, reported that its medical loss ratio (MLR)–the amount the company paid out as a percentage of health plan revenues–ticked up from 83% to 85.4%. That helps explain why CVS in particular seems to be in Wall Street’s doghouse these days. Molina, by contrast, reported a decrease in its MLR from 87.6% to 87.3% (meaning it spent somewhat less covering the medical expenses of its health plan enrollees), which undoubtedly is one reason Wall Street hasn’t punished it as much as the other companies. 

That said, because three of the big companies–Cigna, CVS/Aetna and UnitedHealth–dominate the PBM marketplace (collectively they control 80% of the PBM market) and now operate their own physician practices and clinics, they are able to shift money around in ways that enable them to keep their MLRs deceptively low. I’ll explain how that works in a future post.

And speaking of PBMs, they are becoming increasingly profitable and dominant at those three companies. 

• Cigna now earns far more from its PBM (Express Scripts) than it does from its health plans. (The company also reported a 20% increase in “fees and other revenues” from the PBM side of its house during the first half of this year, which is something the company’s employer customers might want to look into.)

• CVS/Aetna collects more money from its PBM (Caremark) than it does from its health plans or its 10,000 retail stores.

• Almost half of UnitedHealth’s profits are now coming from its Optum division, which encompasses its PBM (Optum RX).

To get back into Wall Street’s good graces, you can expect the companies to try to squeeze more money out of their commercial customers in the form of higher premiums and out-of-pocket requirements; boost enrollment in their Medicare Advantage and Medicaid plans; and refuse to pay for more doctor-ordered care and medications. 

That’s the price we all have to pay so those companies–and, in particular, their top executives, who are paid primarily in company stock–can appease their most important stakeholder–the shareholder.