All but two of the seven largest insurers saw profits climb in the second quarter as hospital operators continued to struggle with weak volumes and higher labor costs.
The nation’s top health insurers again raised financial targets for the year as revenues climbed on increased membership, while some signs indicated demand for medical services was tepid.
All but two of the seven largest insurers saw profits climb in the second quarter compared with the prior-year period, as many saw a key metric for medical spending decrease.
Many of the largest insurers saw profits climb in the second quarter
Industry observers have been closely watching for signals of pent-up demand as many patients delayed care amid the varying spikes in COVID-19 cases.
That didn’t seem to materialize in the second quarter as insurance executives didn’t report a surge in care. Almost all insurers saw their medical loss ratios either decline or remain the same from the second quarter last year.
Executives at Cigna, one of the nation’s largest insurers with nearly 18 million members, said there were fewer surgeries, fewer emergency room visits and fewer people admitted to the hospital in the second quarter compared to the prior-year period.
Direct COVID-19 costs were also better-than-expected, Cigna executives told investors on the second-quarter earnings call. As fewer Cigna patients sought medical care, net income climbed 6% to $1.6 billion.
Cigna wasn’t alone in reporting lighter patient volumes.
UnitedHealthcare, the insurer arm of UnitedHealth Group with more than 51 million members, reported a lower level of COVID-19 patient care and said usage of some medical services still fell below pre-pandemic levels, including pediatrics and the emergency department. UnitedHealth’s net income increased to $5.1 billion.
Humana also noticed a dip in members utilizing medical services, noting fewer Medicare members were admitted to the hospital in the quarter. Humana’s net income also climbed 18% to $696 million.
Q2 performances led insurers to raise their financial expectations for the full year.
“The lower utilization trends and lack of COVID-19 headwinds seen to date, give us confidence in raising our full year adjusted [earnings per share] guide,” Humana CFO Susan Diamond said on a call with investors.
On the other hand, the nation’s for-profit hospital chains reported fewer admissions and a dip in profits as they continued to deal with labor and other expenses amid record high inflation.
“U.S. hospitals and health systems are now halfway through an extremely challenging year,” Kaufman Hall said in a recent report that showed six consecutive months of negative operating margins.
Fitch Ratings revised its ratings outlook to negative from stable for Community Health Systems following the hospital chain’s second-quarter results.
Fitch said the revision reflects “significant increases in labor costs and weakness in volume” throughout the first half of the year.
Nonprofit hospital operators have also faced challenges in the first half of the year.