As big payers like Centene and Cigna come from an atypical year, they predict in their fourth quarter 2020 earnings reports that revenue will increase in 2021, despite utilization and health spending returning to normal levels.
In the fourth quarter 2020 earnings report, Cents ended 2020 with revenue of $ 111 billion, representing 49 percent growth. In addition, the payer added more than 10 million members – or 67 percent growth in enrollment.
Michael Neidorff, president, president and CEO of the Centene, attributed the growth in membership to the extension of Medicaid’s re-appointment suspension. The Centers have added 1.7 million Medicaid members since March 2020, added Jeff Schwaneke, Executive Vice President and Chief Financial Officer of the Centene.
Neidorff also noted that the payer expects the public health emergency to continue by the end of 2021. If this is the case, cost-sharing exemptions and other coronavirus-related benefits are also likely to be extended until the end of the year, including the potential extension of the Medicaid Assignment Solution.
As a result, increased membership could continue in 2021 and increase revenue. The Centers have found that lower utilization trends continued in the first months of 2021, another source of higher revenue. There is also potential for an increase in Federal Medical Assistance Rate (FMAP).
“We continue to expect typical utilization to remain below the historical baseline in the first half of 2021 and return to normalized levels in the second half of the year,” Schwaneke explained.
These may offset some of the negative economic effects of the Medicare Physician Fee Plan update– which could bend the Centen’s revenue from 2021 by about $ 200 million – and government interest rate hikes.
Neidorff also announced a restructuring initiative that would reduce the Centers’ workforce by about six percent, lay off 3,000 employees and eradicate 1,500 vacancies.
“The reductions take place primarily in areas where we have significant acquisition costs and where we have opportunities to utilize our size and scale to increase efficiency,” explained Neidorff.
Affordable Care Act marketplaces will continue to see healthcare spending on coronavirus testing and treatment. The increase in these coronavirus-related costs hurt Centene’s performance in 2020 by $ 3.6 billion. Associated with COVID requirements, an increase of approx. $ 1.6 billion.
Nevertheless, the payer was optimistic about the new year.
“We expect our marketplace business to return to the targeted margins in 2021, reflecting our continued pricing discipline,” said Schwaneke.
The Centen’s revenue for 2021 is expected to land between $ 116.1 billion and $ 118.1 billion, with particular emphasis on revenue from a drug listing and two Oklahoma Medicaid contracts.
Payers will also have to factor special registration period into their projections for the new year. Special registration at the federal marketplace and several state-based marketplaces opens on February 15, 2021 and lasts for three months.
“We see it as a positive,” Neidorff said of the special enrollment period. “It is estimated that there are 9 million people who are not insured and we want to remind you that it is not all Marketplace. Many of these individuals qualify for Medicaid. And as we saw last year, it was positive. ”
Neidorff did not expect the special enrollment period to result in a negative selection of the Centers. The payer tends to attract a good mix of well and risk populations, he argued.
Meanwhile, in Cignas fourth quarter 2020 earnings report, the payer revealed that adjusted revenue reached $ 160 billion by 2020, a growth of 14 percent. In the fourth quarter alone, adjusted revenue hit $ 30.5 billion.
The payer was targeting Medicare Advantage enrollment growth of 10 to 15 percent. Instead, it exceeded expectations by reaching 18 percent growth in enrollment.
David Cordani, President and CEO of Cigna, noted that nearly nine out of ten Cigna Medicare Advantage and prescription drug customers (88 percent) has signed up in four-star plus plans in 2021. The payer has the highest average weighted star rating in the country, he added.
The payer ended 2020 with a total of 16.7 million medical customers, a decrease from the previous year, though only a small one of 0.5 percent.
By 2021, the payer expects to earn $ 165 billion or more in revenue. This would amount to $ 10 billion in growth after adjusting for the 2020 Group revenues.
“In 2021, we expect increased medical costs, including the impact of direct COVID-19-related costs and more normalized non-COVID utilization, and we expect the impact of a gradual economic recovery on our customer base in 2021,” Brian explained Evanko, Chief Financial Officer at Cigna. “Given these COVID-19 dynamics, we expect the primary impact to be in our U.S. medical business.”
The payer expected that its Affordable Care Act marketplace offerings would grow, but that this growth would be offset by the company withdrawing from the unaffordable Care Act individual health insurance market. Cigna presented a medical loss rate of 81 to 82 percent, affected by higher medical costs and the abolished health insurance tax.
Cordani also pointed to three trends designing healthcare services in 2021: pharmacological innovations such as gene therapies and biosimilars, integration of mental health and physical health care, as well as virtual care growth and remote monitoring
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