There's uncertainty ahead for the health insurance industry in 2025

Yahoo Finance12-25 03:00

Health insurers are ending the year on a poor note, with several headwinds ranging from Congress's attempt to reign in costs to lowered profits from higher utilization of benefits. The recent tragic ...

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That has particularly impacted Humana , which sees roughly 30% of its insurance revenues from this market — as is the case with other major players, including Aetna .HONG KONG, CHINA - 2024/06/23: In this photo illustration, the American multinational managed healthcare and insurance company UnitedHealth Group  logo seen display","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU1934455194.USD":"AB SICAV I LOW VOLATILITY TOTAL RETURN EQUITY PORT \"A\" (USD) ACC","LU0072461881.USD":"BGF US BASIC VALUE \"A2\" ACC","IE00B775H168.HKD":"JANUS HENDERSON BALANCED \"A5M\" (HKD) INC","LU1934455863.HKD":"AB SICAV I LOW VOLATILITY TOTAL RETURN EQUITY PORT \"A\" (HKD) ACC","LU1489326972.SGD":"First Eagle Amundi International AHS-MD SGD-H","LU2236285917.USD":"ALLIANZ GLOBAL INCOME \"AMG\" (USD) INC","LU1066051498.USD":"HSBC GIF GLOBAL EQUITY VOLATILITY FOCUSED \"AM2\" (USD) INC","LU0882574055.USD":"富达全球健康医疗A ACC","IE00B19Z8X17.USD":"FTGF CLEARBRIDGE US LARGE CAP GROWTH  \"AG\" (USD) ACC","LU0965509283.SGD":"AB LOW VOLATILITY EQUITY PORTFOLIO \"AD\" (SGDHDG) INC","LU0251132253.USD":"FIDELITY FUNDS  GLOBAL THEMATIC OPPORTUNITIES \"A\" (USD) ACC","ELV":"Elevance Health","LU0708995401.HKD":"FRANKLIN U.S. OPPORTUNITIES \"A\" (HKD) ACC","LU0314106906.USD":"MANULIFE GF GLOBAL EQUITY \"AA\" (USD) INC","LU1267930490.SGD":"TEMPLETON GLOBAL EQUITY INCOME \"AS\" (SGD) INC A","LU2133065610.SGD":"JPMorgan Investment Funds - Global Dividend A (mth) SGD","IE00BJJMRZ35.SGD":"JANUS HENDERSON GLOBAL LIFE SCIENCES \"I2\" (SGDHDG) ACC","LU2242649171.HKD":"FIDELITY FUNDS GLOBAL THEMATIC OPPORTUNITIES \"A\" (HKD) ACC","LU0077335932.USD":"FIDELITY AMERICAN GROWTH \"A\" INC","LU0965509101.SGD":"AB LOW VOLATILITY EQUITY PORTFOLIO \"A\" (SGDHDG) ACC","MLR":"Miller Industries Inc","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","IE00B4JS1V06.HKD":"JANUS HENDERSON BALANCED \"A2\" (HKD) ACC","LU1732799900.SGD":"JPMorgan Investment Funds - Global Income A (irc) SGD-H","LU1571399168.USD":"ALLSPRING GLOBAL LONG/SHORT EQUITY \"IP\" (USD) ACC","LU0557290698.USD":"施罗德环球可持续增长基金","HUM":"哈门那","LU0943347566.SGD":"安联收益及增长平衡基金AM H2-SGD","LU0823416689.USD":"BNP PARIBAS HEALTH CARE INNOVATORS \"C\" (USD) ACC","UNH":"联合健康","LU1267930730.SGD":"富兰克林美国机遇基金AS Acc SGD (CPF)","IE00B7SZLL34.SGD":"Legg Mason ClearBridge - Value A Acc SGD-H","CVS":"西维斯健康","LU2357305700.SGD":"Allianz Global Artificial Intelligence ET H2-SGD","LU1791710582.SGD":"Fidelity Global Demographics A-ACC-SGD (SGD/USD hedged)","IE00B894F039.SGD":"Legg Mason ClearBridge - US Aggressive Growth A Acc SGD-H","IE00BN29S564.USD":"JANUS HENDERSON BALANCED \"A3\" (USD) INC","LU0238689110.USD":"贝莱德环球动力股票基金","LU1506573853.SGD":"MANULIFE GF GLOBAL EQUITY \"AA\" (SGD) INC","LU2491050154.USD":"WELLINGTON SUSTAINABLE OUTCOMES \"A\" (USD) ACC","LU2430703178.SGD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4H\" (SGDHDG) INC","LU0079474960.USD":"联博美国增长基金A","LU1791710400.SGD":"Fidelity Global Demographics A-ACC-SGD","GRO":"Brazil Potash Corp.","LU1037948897.HKD":"AB LOW VOLATILITY EQUITY PORTFOLIO \"AD\" (HKD) INC","LU1854104046.USD":"M&G (LUX) POSITIVE IMPACT \"A\" (USD) ACC","CI":"信诺保险","SGXZ51526630.SGD":"大华环球创新基金A Acc SGD","LU1084165304.USD":"FIDELITY WORLD \"A\" (USD) ACC","SG9999004303.SGD":"Nikko AM Shenton Global Opportunities SGD"},"translate_title":"2025年健康保险行业存在不确定性","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CI":1,"ELV":1,"GRO":1,"HUM":1,"UNH":1,"MLR":1,"CVS":0.9},"content_text":"Health insurers are ending the year on a poor note, with several headwinds ranging from Congress's attempt to reign in costs to lowered profits from higher utilization of benefits.\nThe recent tragic shooting of an insurance executive added an even bigger problem: an angered American public calling for the industry to change.\nThe combination of factors made 2024 tougher than recent years and portends an uncertain start to 2025. \n\"Managed care stocks have significantly underperformed in 2024 (-20% vs. +27% S&P), facing unprecedented policy, reimbursement, and utilization headwinds alongside more recent industry scrutiny. While many of the aforementioned overhangs will continue into 2025 and utilization remains a key variable,\" Morgan Stanley analysts wrote in a note to clients this month.\nAt the start of the year, health insurers began to see a dip in the profits for Medicare Advantage, the popular Medicare plan administered by commercial insurers, as more and more seniors began to get care after delaying during the pandemic. That has particularly impacted Humana (HUM), which sees roughly 30% of its insurance revenues from this market — as is the case with other major players, including Aetna (CVS).\nMedicare Advantage plans offer perks that aren't available with traditional Medicare, such as gym memberships, and insurers have been able to leverage the system to get greater reimbursements for the seniors they cover compared to traditional Medicare. Recent studies have shown that Medicare pays about $300 more per enrollee in an Advantage plan compared to traditional Medicare. \nDespite that, major insurers were pressured throughout the year as increased utilization meant more premium dollars out of their pockets and less profit. In fact, some insurers cut commissions for brokers, which would discourage greater enrollment.\nMedical loss ratio\nHow much insurers spend on care can be tracked by the medical loss ratio (MLR) — or the portion of premium dollars paid out compared to how much is collected. This number has also been less than ideal for the sector this year. \nMajor players saw this increase throughout the year. Humana, for example, saw its MLR jump to 88% in fiscal year 2023, compared to 86.6% in 2022. Year to date in 2024, that number has increased to 89.2%. \nThe Affordable Care Act required insurers to pay between 80% and 85% of all claims, and insurers and investors want numbers on the lower end of that range. But almost all insurers have had elevated MLRs since the end of 2023. \nCVS, for example, reported an MLR of 95.2% in the third quarter of 2024 for the nine months through September, compared to 85.7% in the same period the year prior. \n\n\n\n  HONG KONG, CHINA - 2024/06/23: In this photo illustration, the American multinational managed healthcare and insurance company UnitedHealth Group (NYSE: UNH) logo seen displayed on a smartphone with an economic stock exchange index graph in the background. (Photo Illustration by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)\n \n\n  SOPA Images via Getty Images\n \n\nProfits\nFor the past decade, since the Affordable Care Act went into full effect in 2014, health insurance revenues have skyrocketed as more individuals were covered by insurance, paying premiums along with federal subsidies. But profits haven't grown as drastically — especially in recent years, and despite efforts to curb costs including claim denials.\nYahoo Finance reviewed financial reports dating back to 2013 and found that UnitedHealth Group reported $372 billion in revenue last year, compared to $123 billion in 2013. The profit margin reported last year was 6%, compared to 4.6% in 2013. Similarly, Elevance (ELV) reported $170 billion in revenues last year and a 5% margin, compared to $70 billion in revenues in 2013 with a 5.7% margin. \nThe data shows that even with outsized revenue growth, the cost of managing each new member's health costs has kept margins largely flat — with minimal increases and decreases over the years.\nWendell Potter, a former Cigna (CI) vice president of communications, told Yahoo Finance that, \"the commercial insurance business just simply is not growing, it's been stagnant for some time.\"\nUnitedHealth has had more problems this year than some of the other insurers — with a cyberattack at the start of the year and ending with the tragic loss of its insurance executive. In addition, the Federal Trade Commission and Congress have been looking for ways to break up the industry giant and its various verticals — including the largest owner of doctors practices and pharmacy benefits.\nThese incidents have also weighed more broadly on the sector and have set the industry up for an uncertain 2025.\n\"We think UNH is attractive here on a longer-term basis but will take time to recover. Guidance is, though, conservative so at least management has set a low bar for next year,\" wrote Mizuho's healthcare expert Jared Holz in a note to clients this month. \nBut UnitedHealth Group's stock action has had a blanket effect on the sector.\n\"The optics around the UNH situation make this even worse and are affecting the way in which both Healthcare dedicated investors and more generalist fund managers are looking at the stock/peer group,\" Holz said.\nIt's why, in addition to ongoing industry-specific pressures, a new Trump administration — with the threat of drastic changes to the ACA, but support for Medicare Advantage — will impact how the industry performs in 2025.\nAnjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee on social media platforms X (Twitter), LinkedIn Bluesky @AnjKhem.\nClick here for in-depth analysis of the latest health industry news and events impacting stock prices.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2494641058"}