Elevance vs. United: Diverging Paths in Medicare Advantage with Jakob Emerson

In this episode, Jakob Emerson, Associate News Director at Becker’s Healthcare, joins Scott Becker to break down why Elevance Health outperformed expectations while UnitedHealth stumbled in Q1.

Episode Transcript

(00:00):
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This is Scott Becker with the Becker Healthcare
Podcast.

(00:42):
I'm thrilled to be joined by Jacob Emerson.
Get a chance to visit with Jacob almost
weekly. He hits a payer coverage at Becker
Healthcare and just does a remarkable job.
Jacob, what is going on in the payer
world? What can you share with us this
week? Tell us what you're watching.
Yeah. Good to be with you, Scott. And,
better news for some of the industry giants

(01:03):
this week compared
to last week, which as as everyone knows
was a pretty disastrous
earnings call and and first quarter for UnitedHealth
Group. And on the other side of that
equation, we saw Elevance Health come out with
their first quarter results,
and basically, saying the opposite of UnitedHealth, that
it was, fully in line with their expectations,
that their Medicare Advantage

(01:24):
business is, priced correctly, humming along just as
they expected.
And they, overall, didn't disappoint investors in terms
of what they had told them last year,
about what to expect,
in earnings. So just kind of interesting that
the what I would say the two industry
giants,
Elavance and United,
one, you know, just did not see what

(01:45):
was coming with Medicare Advantage costs, and Elavance
did.
And so,
you know, I'll I think a lot more
we could chat about that and and how,
they achieve that.
Yeah. Tell us how that happens. How do
they the two diverge so much? Because you
expect them all to be sort of moving
in sort of tandem.
And we'd see that divergence. How does that

(02:06):
happen, and and why does that happen? You
would think I mean, I think
it seems like from from the surface level
at least,
what really dragged United down in part was
a lot of the Medicare Advantage,
enrollees that it was taking care of under
its OptumHealth,
care delivery arm. So, basically, it didn't expect

(02:28):
the high level of care utilization on the
Optum side. There was, of course, a lot
of pressures at UnitedHealthcare
on the insurance side, but, Elavance doesn't have
as built out in terms of infrastructure
level on its care delivery side. It does
have care alone, of course, but it's not
the same level. And so it seems like
that was part of it.
I think they they just they they knew

(02:50):
what was coming, in terms of carrier utilization
trends
and how they price their bids and then
informed investors.
So it just it seemed at least for
this first quarter,
Elevance had things more more tightly put together.
And what I think is interesting too is,
you know, Gail Boudreaux is the the president
and CEO over at Elavance. And she's the
former, CEO of UnitedHealthcare

(03:10):
and and was there when the company launched
Optum.
So she so she knows what she's doing.
She's really she's following the same very similar
playbook at Elavance,
in terms of, you know, the creation of
Carillon and spinning out,
some of the non insurance products.
So I thought, you know, that that's pretty
interesting as well. And and Elavance's

(03:31):
executives told investors that,
as expected, flu, respiratory virus costs did increase,
this first quarter, but that was really that
was what they mentioned in terms of the
the clinical,
elevation
in in terms of, health care use. And
and they're expecting all that to resolve,
right now in the second quarter,
and and they feel very good. They, they

(03:51):
reaffirmed their earnings guidance. They actually did that
right after the same day as UnitedHealth's,
earnings calls because, as I'm sure you can
imagine, Wall Street was freaking out
about,
the the big player,
stumbling a bit.
So I just yeah. It's it's once again,
it's a trend that we've seen in the
past in terms of these insurance companies almost
seem to always fall back into two camps

(04:13):
with each other. They're either
very worried about Medicare Advantage and and,
are are saying that care costs are on
the rise and that they don't feel they're
gonna meet their earnings targets,
or they they do what Ellevance did this
time around. And, they say that they've priced
correctly and they feel good about the year
to come, which I think is really interesting
in terms of when you look when you
look back over the last few years and,

(04:36):
what's been happening,
with all these Medicare Advantage pressures,
at this point, it really is only Elavance
that seems to have come through all of
this the most unscathed and and the most,
high performing
in terms of quarter after quarter. United, I
would say, had had been in that camp
as well up until this point, but but
this last this last first quarter broke that

(04:57):
trend. So
as it stands now, Elavance seems to be
the most,
efficiently run Medicare Advantage, you know, publicly traded
insurer from from our perspective.
No. It's really fascinating to watch. And and
it's what what's so interesting is because Elavance
has been on the course to try and
be united two point o or or Optum

(05:18):
two point o or become like Optum, become
like United just like people used to be
trying to be like Mike. Yeah. And they've
not been able to move as fast as
they'd like to on that. And that probably
has ended up being a positive in terms
of how things have worked out in terms
of margins currently in some of those other
businesses.
So it really is fascinating to watch what's
going on at Elevance and how well they've

(05:38):
they've survived through this.
CVS Aetna is another complicated one because in
addition to Medicare Advantage, they've got such a
bigger footprint in so many different ways Right.
Beyond just that where Cigna is more comparable
to Elevance
and that it's really mostly an insurance company
versus everything else. But just fastly to watch
this as it plays through. So so right

(05:59):
now, LVNV did great.
I I also saw Humana the other day,
took it on the chin in their stock
price, I think, yesterday or two days ago.
Some issues on their appeal of their Medicare
star ratings didn't go as they wanted it
to.
Anything else that you because that's another publicly
traded Mhmm. Insurer or payer.
Jacob, besides Elavance and and it good good

(06:21):
news this week for Elevance after bad news
this week for United, anything else that you're
watching closely currently? It's interesting you that you
brought up, some of the other guys. Obviously,
like you mentioned, CBS, Aetna, they've really been
hampered by MA costs, and, it's dragging down
the whole business, I think, along with just
the the struggles of the retail pharmacy space.
Humana's gonna be an interesting one to watch
in terms of earnings because their their their

(06:43):
cards are really in Medicare Advantage at this
point entirely.
So so interesting to see that one. They've
been struggling,
these these last few quarters.
And then, yeah, Cigna Cigna's
completely gotten rid of its Medicare Advantage business.
They sold it to the, the parent company
of the Blue Cross plan here in Illinois,
health care service corporation.
So Cigna is yeah. They do have their

(07:04):
insurance business, but they're they're making, I think,
a good chunk of their money now at
this point on on Evernorth and Express Scripts.
So in the in the more the health
care services arm and and the pharmacy services.
So everyone's got a different strategy here in
the publicly traded space.
They're all kinda taking it a bit differently.
But when we're talking about Cigna specifically, they

(07:24):
got out of Medicare Advantage when it comes
to actually holding those those health plans.
But one thing I I did wanna mention,
Scott, is just, you know, this this next
week coming up, April,
we've got the our our, payer roundtable happening
here in in Downtown Chicago. And I just
wanna give some kudos to our to our
team and to our, you know, our listeners,
and I hope they know just the extreme

(07:46):
caliber of what to expect out of this
event. It is truly it's the industry leading
insurance event at this point nationwide. There's no
other company or organization,
hosting this this level of executives from across
the insurance industry, from every single major publicly
traded company that we just talked about is
going to be on-site with us from almost

(08:07):
every single insurance company in the nation
in general.
But what we're what we're hearing from a
lot of our our panelists that are coming
to join us next week as we as
we prep them on on, on prep calls
and things like that is, you know, they're
they're talking and what we're expecting them to
talk about is things we've talked about before,
that that patient expectations

(08:28):
have have and are shifting in the insurance
industry is just it's not keeping up when
it comes to care access and and the
transparency of pricing and what to expect when
you go to the doctor's office.
They're they're really getting ready for the fact
and as as we're talking about Medicare, this
entire,
podcast, the population is just getting older and,
you know, they're building out their Medicare Advantage

(08:49):
businesses,
to meet that demand.
But what we're also you know, something newer
that we've been hearing these last few weeks
is that,
m and a activity is just it's totally
on pause right now across the industry. And
I will say I went back and looked
at some of our coverage and some of
our, reports on all of this. And, you
know, the Cigna deal with Medicare and health

(09:10):
care service corporation, it it buttoned up this
year, and UnitedHealth is still trying to purchase
the home health provider, Amedisys. But beyond that,
we're we're really not seeing anything. I mean,
we're about to go into the fifth month
of the year, and there's been no major
insurance
deals, mergers, acquisitions
announced yet. There's been a few small
regional,

(09:31):
acquisitions and purchases
between some of the smaller insurers, which, you
know, is negligible in the grand scheme of
things.
But on the on the big scale with
the these with the publicly traded giants, we're
we're really seeing,
just total hesitation because of all the uncertainty
going on right now in Washington,
especially when it comes to, you know, Medicaid,
ACA, and Medicare policy. And that's what we're

(09:52):
hearing from our panelists and and certainly from
a lot of our vendor,
vendors joining us as well, is just that,
everybody is playing a game wait and see
right now, and it's, it's, you know, creating
a lot of backup,
in the insurance industry in terms of growing
these companies.
No. And that's absolutely fascinating because what you're
you see that throughout the entire m and

(10:12):
a world, not just in health care and
insurance. Everybody's sort of taking a pause
when we had all these market gyrations with
the tariff discussions, the trade discussions, and so
forth. So you've got that
throughout the industry and then particularly in the
insurance industry and just fasting to hear that.
Jacob, as always, thank you so much for
joining us today on the Becker Healthcare podcast.

(10:34):
We will see you next week at the
payer roundtable and at the annual meeting and
so forth. But but just fantastic to visit
with you as always. Thank you for joining
us. Thank you, Scott.