- All publicly traded payer earnings in the first quarter were either credit-neutral or positive, according to a new report from Moody's. Upward-trending growth was largely attributed to contained medical costs and increased membership.
- Membership growth was mostly driven by Medicare Advantage, which has continued to be a boon for payers. Collectively, EBITDA was up 29% from the prior-year period, although results were skewed by a number of acquisitions in the sector, most notably CVS Health's $78 billion buy of Aetna.
- Major risks to continued growth in the sector include merger integrations and potential healthcare reforms such as "Medicare for All." Current proposals would limit or eliminate the role of private insurance, and while Moody's considers such proposals "highly unlikely in current circumstances," the agency concluded a move toward single-payer reform is "certainly possible" in the near future.
Projections remain largely the same since the end of 2018, with MA membership and growing migration to outpatient services fueling success in the sector. Contained medical costs were the primary driver behind the sector's overall growth in the first quarter. That success, according to Moody's, is the result of efforts to better manage utilization and the "evolving impact" of value-based care.
Moody's notes membership growth during the quarter was 2%, making it the "best sequential performance in three years." The major role MA continues to play in membership growth reflects the swelling aging population and preference for MA over traditional Medicare, according to the analysis.
Growing support for single-payer reform among 2020 Democratic candidates could be a roadblock for insurers in the future. Nine proposals related to Medicare for All have been introduced into Congress thus far, and Moody's said "any of them would be credit negative for health insurers."
The House Budget Committee held a hearing on Medicare for All this week following the release of CBO's anticipated single-payer report earlier this month. The report provides a loose outline of potential paths toward single-payer reform, although it does not mention or analyze any current proposals.
Debate surrounding Medicare for All is only likely to continue as 2020 approaches, SVB Leerink analyst Ana Gupte said.
"Our stance, and that of our D.C. policy specialists, is that (Medicare for all) is a 2020 campaign tool weaponized by the Democratic Party, which has no chance of becoming law, given the steady moderate base who would never support such a Bill," Gupte writes.
The continued foray of Silicon Valley behemoths such as Amazon, Google and Apple into healthcare is another concern shared by payers. According to recent CB Insights research, mentions of those three companies during major insurers' quarterly earnings calls have increased each year.