Elevance Health sees fourth-quarter revenue growth and earnings decline

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Elevance Health’s revenue grew over 9% in Q4 2022 to $39.9 billion from $36 billion in Q4 2021. But profits are down 16.5% year-over-year, falling from $1.1 billion last year to $949 million in 2022.

Operating revenue was $39.7 billion in the fourth quarter of 2022, up $3.6 billion, or 10.1%, year-over-year. Full year operating revenue was $155.7 billion, up 13.7% from 2021.

Growth in both the quarter and full year was driven by higher premium income due to growth in Medicaid enrollments, growth in Medicare Advantage, and higher premium rates to cover general cost trends, Elevance said.

While the decline in earnings was significant, Elevance maintained that the numbers still beat Wall Street’s expectations.

Elevance President and CEO Gail Boudreaux said on a recent call that her Affordable Care Act plans are now being offered in every county in the 14 blue states. From a business standpoint, she said the focus is on streamlining: as COVID-19 has eaten the margins of commercial and Medicare health plans, the company is re-evaluating its risks in the commercial business.

“In 2023, in our Medicare Advantage business, we are enjoying improved reimbursement rates, risk-adjusted income, and star-quality bonus payouts,” she said.

“After we extended our commercial offer on January 1 and the 2023 Medicare Advantage plan is underway, we remain confident in the previously discussed margin recovery as well as improving our commercial and Medicare business to more than offset expected dropout of participants in our Medicaid business when re-evaluation begins April 1,” Boudreau said.

WHAT IMPACT

As of December 31, the total number of members was about 47.5 million, up 2.2 million or 4.8% from last year. Public business membership increased by 1.1 million year-over-year, driven primarily by the growth of the Medicaid business and the organic growth of Medicare Advantage. Membership in commercial and specialty companies increased by 1.1 million compared to last year, mainly due to strong sales to paid employers.

Medical members increased by 248,000 during the fourth quarter, driven by organic Medicaid growth, which Elevance attributed primarily to the suspension of recertification, as well as the acquisition of Vivida Health, which added 29,000 Medicaid members.

Operating cash flow was $1.5 billion, or 1.6 times net income in the fourth quarter, down $3.2 billion from the previous year’s quarter. The year-over-year decrease was due to early receipts of premiums from Medicare and Medicaid service centers in the third quarter of 2022, which were received during the fourth quarter. For all of 2022, operating cash flow was $8.4 billion, or 1.4 times net income.

The disbursement expense ratio was 89.4% in the fourth quarter, down 10 basis points from last year. Elevance said that this decrease was due to the adjustment of certain quality improvement costs in accordance with the latest regulatory clarifications.

Barring the reallocation, Elevance said its benefit expense ratio would have increased due to the non-recurrence of favorable out-of-period adjustment items in Medicaid in the previous year’s quarter, offset in part by improved medical underwriting performance in the commercial and specialty business. .

The benefit spending ratio was 87.4% for all of 2022, down 10 basis points from last year. This decline, according to Elevance, was mainly due to the reallocation of some quality improvement costs. Barring the reorganization, the full year benefit expense ratio would have increased due to a shift in the business structure towards Medicaid, which has a higher benefit expense ratio than commercial and Medicare health plans.

BIG TREND

Elevance Health is poised to acquire Blue Cross Blue Shield of Louisiana with a definitive agreement this week to catch the insurer, and BCBSLA will join Elevance Health’s Anthem Blue Cross Blue Shield family of brands.

Both organizations said they are “combining a mission” to improve access, quality, and affordability for Louisiana residents.

The previous acquisition Elevance announced was the purchase of BioPlus Specialty Pharmacy in November. BioPlus provides a range of specialized pharmacy services for patients with complex and chronic conditions such as cancer, multiple sclerosis, hepatitis C, autoimmune diseases and rheumatology.

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