Latest / Becker’s Healthcare Podcast / Payers Under Pressure: A Tumultuous Week for Health Insurance Giants with Jakob Emerson

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Payers Under Pressure: A Tumultuous Week for Health Insurance Giants with Jakob Emerson · Becker’s Healthcare Podcast

• 0:02
  This is where health insurance leadership comes together.
• 0:05
  Becker's fourth annual spring payer issues roundtable brings
• 0:08
  together over 400 payer and health plan executives
• 0:12
  and more than 100 speakers to Chicago April.
• 0:16
  This year's event includes keynote conversations with the
• 0:19
  industry's top leaders and former president George W.
• 0:23
  Bush. For the full agenda and event details,
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  visit beckershospitalreview.com
• 0:27
  and click on the events tab in the
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  upper right. We're looking forward to hosting you
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  here in Chicago.
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  This is Scott Becker with the Beckers health
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  care podcast.
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  We're joined today by our payer guru,
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  extraordinaire,
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  Jacob Emerson,
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  and what a week it's been for payers.
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  Jacob, I'm gonna tee you right up, and
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  you're gonna tell us what are we watching
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  in the payer universe,
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  and and what does it look like, and
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  how is it evolving?
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  Yeah. Hey, Scott.
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  Well, I mean, to your point, it's been
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  a quite the week.
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  And I saw your post on LinkedIn this
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  morning that it's been a bloodbath,
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  for
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  payer stocks just in the last twenty four
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  to forty eight hours and for multiple reasons.
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  You know, there's the MA rate flat proposal
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  from from the government.
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  There's UnitedHealth's
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  most recent earnings report, which was not good
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  coming off of already pretty bad year for
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  the company and where they were supposed to
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  be making recovery with their new and old
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  CEO.
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  And then last week, we had all of
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  the insurer CEOs get dragged to Washington to
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  testify
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  in back to back hearings,
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  nine hours of of testimonies
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  in front of congress,
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  as there's a lot of political fights going
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  on over the ACA, over Medicare Advantage, over
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  employer, health insurance costs. So just a real
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  quagmire conundrum, however you wanna describe it. It's
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  not a good time for the health insurance
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  industry and really not a good time for
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  the big publicly traded guys.
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  So what happened from here? I know that
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  United stock went down almost 20%
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  yesterday. That's worst,
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  down day in a long time. No. It's
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  down 47% over the last year. It also
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  projects its first year, 2026,
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  without revenue growth, and I think nearly four
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  decades.
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  Yeah. Where does this go from here? What
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  what is the,
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  because I and, again,
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  Medicare Advantage rates not going up nearly as
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  much as the payers had hoped for, but
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  Medicare Advantage costing the government more than traditional.
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  Medicare is there's there's
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  changing enthusiasm for Medicare
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  Advantage or people trying to figure that out.
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  Any thoughts? Or what are you hearing about
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  where Medicare Advantage goes from here and where
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  the payers go from here?
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  Well, I mean, I think if we're just
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  looking at these companies as a whole and
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  we're just talking about the, you know, the
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  big publicly traded conglomerates,
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  I I've definitely been hearing rumblings that this
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  is the you know, I I think on
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  the extreme end, this is the beginning of
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  the end of the big vertically integrated conglomerate.
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  Whether you believe that or not, I think
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  is totally up to I think that's a
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  lot of speculation. But what we are seeing
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  in terms concrete
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  actions from these companies, let's take UnitedHealth,
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  you know, the biggest one yesterday. And we
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  knew this last year because they've been having
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  a difficult,
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  couple years now financially. But,
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  yesterday in their their earnings call with investors,
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  they they straight up admitted, that they have
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  been hurt by overexpanding.
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  They got too big. They Optum especially got
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  too big in terms of its provider,
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  portfolio,
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  and they spent last year and probably will
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  this year scaling back, in terms of how
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  many providers they contract with,
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  how many just the literal physical footprints,
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  in terms of their clinics in certain markets
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  and then walking away from,
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  contracts with other insurers where Optum
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  was contracted with to take care of other
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  insurers members in their in through their providers.
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  So,
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  so that's on the Optum side. And then
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  on the UnitedHealthcare, the insurance side, they and
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  this is you know, it's planned, but they
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  are fully,
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  they expect to lose up to almost 3,000,000
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  members
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  this year alone across all of their markets,
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  across ACA, employer, commercial,
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  Medicaid, and Medicare Advantage. And, again, it is
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  purposeful, but they're basically
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  they're pulling back on the quantity of the
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  amount of members they have across these markets
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  to focus on,
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  the margin, making sure that these members that
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  remain,
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  that they that they're, more profitable. And it's
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  either through, you know, the
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  the coding practices or the contracts they have
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  with providers in certain markets. It's gonna be
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  different everywhere. But that's really the the message
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  overall for these companies is it's it is
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  margin
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  over expansion over expansion of membership, which has
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  not been the case in the past. And
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  then, you know, you asked about where does
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  Medicare Advantage go from here. And I think
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  that's a really good question as well. CMS
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  I think overall, CMS and then under this
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  new admin newer administration,
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  there's a bipartisan effort clearly,
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  to go after the the risk adjustment, the
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  coding issues that we've we've heard about for
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  over a decade now.
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  And and so they're going after that in
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  this latest proposed rule, but they're also going
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  after how much these plans are getting paid.
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  You know, they got a $25,000,000,000
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  boost last year. And this year, there's gonna
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  be no payment increase. There is point it's
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  less than 1%. It's point 09%. It's about
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  $700,000,000,
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  which for an industry as big as as
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  big as us is really nothing.
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  And so that means that these plans are
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  going to have to retrench even further than
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  they did, last year slash this year. They're
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  gonna have to pull out of more markets.
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  They're gonna have to slim down benefits even
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  further. And who does that ultimately hurt? Seniors
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  on the ground. But for the companies themselves,
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  it's gonna mean less money and less,
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  products to put out there.
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  Fascinating. And and you mentioned at the end
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  of the day, it ends up hurting the
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  consumers.
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  Yeah. And this is gonna lead to less
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  choices for consumers.
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  And and it's gonna happen relatively rapidly, quite
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  frankly, because you've already seen so many of
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  the other insurers scale back their Medicare Advantage
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  Plans as loss ratios get tighter
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  and things get more challenging.
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  But but this is gonna push
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  some systems,
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  some patients,
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  consumers, seniors back in the traditional Medicare. Right?
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  I mean, there's just no way around that.
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  Right? Yeah. I I would I would think
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  so. Or to other competitors' plans if they're
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  still available, which they're also still gonna be
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  going through the same,
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  financial issues into
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  with MA.
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  So yeah. But the thing you know, it's
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  it can be tough to switch back to
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  to traditional Medicare either because, you know, it's
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  more expensive or,
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  previous and conditions can be,
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  counted against you, whatever it is.
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  You know, it's not just an easy switch
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  back. So that is a problem. But, you
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  know, I've also I think this just points
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  to a conversation you and I were having
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  a few weeks ago, when we knew that
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  the payer CEOs were gonna be summoned into
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  congress to talk about all these issues across
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  the board, not just in MA. And I
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  think it's just maybe slowly,
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  lawmakers and regulators at CMS,
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  whoever's
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  slowly come doing come into a realization of,
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  what has happened
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  when you basically handed over the entire health
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  care system slash health insurance industry to these
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  mega conglomerates,
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  and, you know, about five or six of
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  them. And and this is now where we're
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  at. And so, you know, I don't know
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  if that means some reflection in terms of
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  Let me ask you to stop there for
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  a second. Yeah. Because you've said something out
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  loud that I've been saying for some time
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  that I never hear you say out loud,
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  which is which is this is really what
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  happens
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  when the government turns over Medicaid and Medicare
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  to four or five large payers, maybe six
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  or seven when you count Humana and Centene
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  on the Medicaid side and so forth.
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  But isn't that what's happened? We we've just
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  turned over a huge amount of the government
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  programs,
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  which are now almost about half of all
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  health care, two huge payers, and it's become
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  middle people amongst middle people amongst middle people.
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  I mean, isn't that what's happened that you've
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  just Yeah. Yeah. I mean, it's exactly what's
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  happened. You've got more than 50% of, seniors
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  enrolled in private Medicare plans, and I believe
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  it's over 40 of the states now do
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  manage Medicaid, which is just privatized Medicaid contracts.
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  And then that's, of course, of course, you
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  got the ACA as well, which is just
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  a marketplace for private health insurance to insurers
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  to sell their health plans.
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  So, overall, you've basically you've turned what is,
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  federal service health care services, and you've given
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  those contracts to private insurance companies over the,
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  let's say, the last fifteen to twenty years.
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  And now this is where we're at.
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  And however, you know, you think about this,
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  however people fall politically,
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  I think at the end of the day,
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  it's, you know, the the fact is that
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  these are large publicly traded companies.
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  Their bottom line, their main goal is to
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  make money for investors to return a profit.
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  And they have to return a profit off
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  of what are public services, Medicaid and Medicare.
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  So, you know, however
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  however you, you know, fall down the political
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  line, I think that's the crux of it
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  is that these public programs have been turned
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  over to profit driven companies, and and this
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  is now the effect of where we're at.
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  Right. A 100%. So we'll see where this
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  all evolves.
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  And, Jacob, I mean, this has just been
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  a fascinating week to watch the payers. Couple
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  of them down were down nearly 20%.
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  Yeah. Anything else you wanted to comment on
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  today or share today about this, or or
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  is that enough for today? Well, and to
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  your point of, you know, the the stock
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  bloodbath down 20%, I think it's,
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  almost a $100,000,000
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  in stock market value across the publicly traded
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  ones combined
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  over the last forty eight hours, which is
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  just, I mean, horrible coming off of a
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  pretty bad year, at least for even just
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  for United. It's even the incremental gains they
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  they tried to build back last year have
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  just been almost entirely wiped out.
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  But I did wanna just, you know, very
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  briefly comment on the hearings from from last
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  week because,
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  like I mentioned
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  a few minutes ago, you know, that now
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  CMS under Trump and the same as under
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  Biden, that it was, they weren't being very
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  favorable towards the MA plans in terms of
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  rates and cracking down on certain risk adjustment
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  policies,
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  in in congress as well. The the both
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  house Republicans and Democrats were aligned in the
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  facts of draw of pointing their ire towards
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  the CEOs.
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  I will say, you know, it didn't really
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  seem like,
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  the the the main issues were really they
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  didn't nail
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  the the what what is driving up costs.
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  They didn't really discuss things like GLP ones
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  or,
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  you know, how a lot of these companies
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  are are structured and how their finances work.
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  But it is very clear, you know, from
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  a bipartisan
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  perspective that Americans through these law makers are
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  are very, very angry at these companies. Whether
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  these companies deserve it or not,
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  in terms of where costs are now,
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  you know, I I think, again, that could
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  that could be heavily debated. But,
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  there's definitely you know, these companies are seen
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  as the face
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  of high ACA premiums, high employer insurance costs,
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  and and, you know, the MA network issues
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  that we see with hospitals all over the
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  country.
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  So even if they aren't necessarily completely to
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  blame because of, you know, things like drug
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  manufacturing costs, the fact that health systems are
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  asking for a lot more money now in
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  their contracts.
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  It's it's the insurance CEOs that are the
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  ones that are have to have to answer
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  for it all. Well, it's it's it's an
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  easy win it's an easy win and game
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  for the politicians, of course, to go after
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  the the the health insurance CEOs.
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  And, of course, it it is, as you
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  say, more complicated than this because so much
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  of this has happened
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  from the government flowing through so much money
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  to the payers
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  that has led the ton of health care
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  inflation,
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  and then the payer is trying to control
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  what they send through to providers
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  and and health systems.
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  And I I saw that, you know, United
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  reported a Medicare loss ratio of 89.1%,
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  which in the years that I've been watching
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  medical loss ratios, that's the highest in some
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  point. Yeah. It still means 11% of the
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  dollar is going to some kind of administrative
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  cost other than actual
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  health care. You know? And that's that's up
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  from 80 to 83%. When I used to
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  start following this, 89% is a high number.
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  I grant that, but it still means a
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  crazy percentage of cost in dollars flowing through
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  the administrative health care versus direct health care
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  delivery.
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  And so, you know, there there is you
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  know, in in some ways,
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  the big insurers are just becoming a huge
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  pass through to the government, and the government
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  can't blame themselves for how much money they
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  spend on health care, so they gotta blame
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  it through the payers in some ways where
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  they put all the money through. So it's
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  it's really it it is really sort of
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  like the emperor has no clothes because everybody's
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  at fault. Everybody's at fault, and that's where
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  all the finger pointing comes from. But I
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  I think, you know, I talked to Elevent's
• 12:27
  president of, she's she's the individual in charge
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  of all of their contracts and across all
• 12:31
  the states that they about this 14 states
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  that they contracted from a health plan perspective.
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  And, you know, she basically told me, you
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  know, everybody wants to point at us saying,
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  you know, we take in record profits that
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  we're all just trying to make a profit
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  and all this good stuff. But she goes,
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  at the end of the day, we have
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  a fiduciary duty to employers to get the
• 12:46
  best cost for them to keep the cost
• 12:47
  down as much as possible and that they
• 12:49
  don't make a lot of money on on
• 12:51
  health insurance.
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  They were even saying in these hearings, they
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  they make single digit margins if that a
• 12:57
  lot of them lose money on their ACA
• 12:59
  plan businesses.
• 13:00
  So the the insurance isn't necessarily the problem.
• 13:03
  It is the vertical integration. It's where where
• 13:05
  they do actually make a lot of money,
• 13:07
  which is not in health insurance. And with
• 13:09
  the vertical integration trend, it does seem like
• 13:11
  the cracks are starting to show when you
• 13:13
  talk about Optum, when you talk about all
• 13:15
  the PBM scrutiny as of late. Whether that
• 13:18
  actually means anything,
• 13:19
  I guess we'll see. But there are there
• 13:22
  are cracks beginning to show in how these
• 13:24
  companies have structured themselves over the last decade
• 13:26
  or so.
• 13:28
  Jacob Emerson,
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  always great to visit with you. A complicated
• 13:31
  set of issues, but fascinating to watch. Thank
• 13:33
  you for joining the Becker's Healthcare podcast today.
• 13:36
  Thank you, Scott.