Welcome to the latest edition of Pulse, our health insurer financial update. We keep you informed about key market trends and dynamics that impact health insurer financial results and profitability. Late last year, we released our analysis of the Q3 2024 financials. This article includes Q4 2024 net loss ratio and profitability trends for insured business, earnings components, commercial and Medicaid membership —including redeterminations — and market capitalization highlights.
Five key trends driving public health insurers’ financial performance in Q4 2024
Average profit margins decreased to their lowest point since before 2021
There was a 1.5% decrease in average profit margin from Q3 2024, mainly due to a decrease in Cigna’s reported gain.
Average loss ratios increased considerably
Average loss ratios increased compared to Q3 2024, driven by higher acuity in the Medicaid business, and are 4.5% higher than Q4 2023. Cigna reported a 5.1% deterioration in their loss ratio compared to Q3 2024.
Operating expense ratios declined relative to Q3 2024
Reported operating expense ratios were 1.5% lower than Q3 2024 and are at their lowest point since before 2021.
Decline in Medicaid membership due to eligibility redeterminations has slowed down
Medicaid membership only declined by about 100,000 members in the quarter, reflecting a deceleration in the significant losses experienced in previous quarters due to the eligibility redetermination process.
Market capitalization declined for all carriers
As of December 31, 2024, the collective quarter-end market capitalization of the seven public healthcare companies we monitor was its lowest since before 2021.
Net income for public health insurers declined relative to Q3 2024
Overall, the unweighted average profit margin (net income/premium) of 1.5% for the four insurers is 1.5% lower than the Q3 2024 unweighted average, and 3.6% lower than the Q4 2023 unweighted average of 5.1%.
UnitedHealthcare recorded a net profit margin of 5.6% in Q4 2024, a 0.5% decrease versus Q3 2024, which is in line with levels seen in 2022 and 2023.
Cigna saw their margin decrease in Q4 2024, from 6.2% in Q3 2024 to 1.4% in Q4 2024, the lowest point it has been since Q4 2020.
Elevance’s profit margin decreased again in the quarter from 2.3% in Q3 2024 to 0.9% in Q4 2024.
Aetna CVS Health continues to show a negative profit margin in the quarter though it showed a slight improvement from the prior quarter, from a loss of 2.5% in Q3 2024 to a loss of 1.9% in Q4 2024.
Average loss ratios increased 2.5% in Q4 2024 versus Q3 2024
On average, the medical loss ratios (medical costs/premium) for all four of the large public companies that we reviewed were 2.5% higher in Q4 2024 than Q3 2024. In Q4 2024, reported loss ratios were 94.8% for CVS Health (Aetna), 92.4% for Elevance, 87.9% for Cigna, and 87.6% for UnitedHealthcare.
Overall, the unweighted Q4 2024 average loss ratio of 90.7% was 4.5% higher than the 86.2% average loss ratio experienced in Q4 2023. Carriers also reported year-over-year fourth quarter increases, with Aetna CVS Health having the most significant increase of 6.3% from 88.5% in Q4 2023 to 94.8% in Q4 2024.
Average Q4 2024 operating expense ratios declined relative to Q3 2024
Operating expense ratios (operating expense/premium) decreased by 1.5% from Q3 2024 to Q4 2024. All carriers that were reviewed show decreases with Cigna’s being the most significant at 2.7% — attributable to revenue growth outpacing expense growth and ongoing efficiencies while the other carriers experienced declines of about 1%.
Key insights of Q4 2024 health benefits and medical care ratios
Most companies’ Q4 2024 utilization is on the high end of expectations, particularly for Medicaid business, as redeterminations leave companies with higher acuity members enrolled in Medicaid than prior quarters.
Centene
Health benefits ratio for the quarter was 89.6% and 88.3% for the full year. Centene stated that this was driven by Medicaid, as the acuity of retained and rejoining Medicaid members is higher than the acuity of members lost during the redetermination process.
CIGNA
Medical care ratio (MCR) in the quarter continued to be elevated relative to CIGNA’s expectations at the beginning of year, ending the quarter at 87.9%. Full-year MCR ended above the guidance range of 81.7% to 82.5% at 83.2%. Notably, CIGNA experienced higher trends in stop loss business, which it expects to continue in 2025. Overall, they expect their 2025 MCR to end in the range of 83.2% to 84.2%, which reflects the heightened stop loss trends.
Aetna CVS Health
Reported medical benefit ratio (MBR) of 94.8% in the quarter, which was 630 basis points higher than the prior year quarter. Aetna CVS Health noted that this increase was primarily driven by higher acuity in Medicaid, and the premium impact of lower Stars Ratings for payment year 2024 on its Medicare Advantage business. This was partially offset by a 220 basis point impact from premium deficiency reserves recorded in the third quarter and higher levels of favorable prior period reserve development. In 2025, they expect their medical benefits ratio will improve by 100 basis points over 2024, yielding an MBR of approximately 91.5%.
Elevance
Reported a benefit expense ratio of 92.4% within the quarter due to higher-than-expected Medicaid trends. Elevance ended the year with a full-year benefit expense ratio of 88.5%. Overall, they expect the 2025 benefit expense ratio to be between 88.6% and 89.6%, which reflects the persistence of elevated cost trends, particularly within Medicaid, as well as impacts from recent acquisitions and Medicare Part D benefit redesign changes.
Molina
Reported a business-wide medical cost ratio of 90.2% for the quarter which was above expectations due to higher than expected medical cost pressure in their Medicaid and Medicare segments. Molina also noted considerable variation in their MCR across their various lines of business. Medicaid business had a 90.3% MCR for the year, 0.5% of which is attributable to the premium reduction in their California business. Medicare Advantage saw a full year medical cost ratio of 89.1%, which was above their long-term target range and driven by elevated medical costs. The medical cost ratio for Molina’s Marketplace business was 75.4% for the year, significantly outperforming their long-term target range. In 2025, Molina projects a consolidated MCR of 88.7% which reflects a continued elevated cost trend in both Medicaid and Medicare. They also highlighted that the outperformance in their Marketplace business will allow them to reinvest excess margin into 2025 pricing to drive higher growth and sustained mid-single digit pretax margins.
UnitedHealthcare
Reported a full year medical care ratio of 85.5%, which was 150 basis points above their original outlook. For 2025, UnitedHealthcare expects a medical care ratio of 86.5%, plus or minus 50 basis points, 100 basis points above the 2024 result due to IRA impacts, the second year of the Medicare funding cuts, and a continued mix shift toward public sector offerings.
Q4 2024 membership trends and projections for Medicaid and commercial plans
For the monitored public carriers, Q4 2024 Medicaid membership continues to decline, while Commercial enrollment decreased for the first time since 2022.
In Q4 2024, total Medicaid membership for public carriers decreased by 0.3% from Q3 2024, driven by the continued redetermination of Medicaid eligibility. However, total Medicaid enrollment is still about 22% higher than at the beginning of the pandemic. Total Commercial membership decreased slightly by about 0.1% over Q3 2024.
During their earnings calls, most carriers provided insight into their year-to-date membership changes in line with expectations for 2025. In addition, some carriers also commented on the ongoing process of states redetermining Medicaid eligibility. The Public Health Emergency officially ended on May 11, 2023, with several states beginning the redetermination process on April 1, 2023.
Centene
The quarter ended with just over 13 million Medicaid members. Expect to end Q1 2025 with around 5 million Commercial business members and Medicare enrollment in the low to mid 900,000s.
Aetna CVS Health
Medical membership was roughly flat in the quarter and ended at about 27.1 million. In 2025, Aetna CVS Health expects aggregate membership to decline by over 1 million members, primarily driven by reductions in their individual exchange and Medicare products.
Elevance
Ended the quarter with medical membership of approximately 45.7 million members, a decrease of over 1.1 million year-over-year but relatively flat relative to Q3 2024. They noted a projection of total membership between 45.8 million and 46.6 million by year-end 2025, driven by expected growth in their commercial fee-based membership, ACA exchange plans, and Medicare Advantage.
Molina
Molina provided expectations for 2025. They expect to end 2025 with Medicaid enrollment at 5.0 million, an increase of 100,000 over year-end 2025. Medicare enrollment is expected to end the year of around 250,000, an increase of 30,000 relative to the start of the year due to strong open enrollment growth in their D-SNP product. Finally, they also noted that they expect to end 2025 with 580,000 Marketplace members, an increase of over 30,000 relative to the start of the year, driven by their acquisition of ConnectiCare.
UnitedHealthcare
UnitedHealthcare added 2.4 million new domestic commercial members year-over-year. They expect to grow by another 1.9 million members in 2025 across both commercial and public sectors.
The chart below displays the changes in reported enrollment for the 16 most recent quarters for Commercial and Medicaid for a set of public companies where counts were available on a consistent basis. In the quarter, total Commercial membership decreased by about 0.1 million. Similarly, Medicaid membership decreased by approximately 0.1 million as well largely due to the eligibility redetermination process.
Health plan capitalization decreased considerably in 2024
From Q4 2023 to Q4 2024, the collective market capitalization of the seven public healthcare companies we monitor experienced a reduction. Between December 31, 2023, and December 31, 2024, the combined market capitalization of these seven public health plans fell by 15.7%. During the same period, the S&P 500 index grew by 23.3%, outpacing the healthcare companies by almost 40%. Similarly, in the fourth quarter of 2024, the market capitalization of healthcare firms saw a considerable reduction compared to a small increase within the S&P 500 Index. From Q3 2024 to Q4 2024, the market capitalization of the seven public companies decreased by 18.4%, while the S&P 500 Index increased by 2.1% over the same period.
Elevance (-29.0%) and Aetna CVS Health (-28.6%) saw losses in market of almost 30%. Centene (-22.8%) and CIGNA (-20.7%) both saw losses of over 20%. Humana (-19.9%) and Molina (-17.5%) losses were also quite large. Finally, UnitedHealthcare (-13.8%) also lost over 10% of its market cap in the quarter. These losses were all in stark contrast to the gain in the S&P 500 Index of 2.1%.
For more actuarial insights, be sure to look out for the next Pulse newsletter later this spring.