Elevance Notches $2.3B In Profit, Unfazed By Change Attack

Dive Brief:

• The impact of a cyberattack on a major claims clearinghouse, membership losses from Medicaid redeterminations and lower funding in Medicare Advantage didn’t stop Elevance Health from beating Wall Street expectations for earnings and revenue in the first quarter.
• The Indianapolis-based insurer brought in $2.3 billion in profit — up 13% year over year — on revenue of $42.6 billion, according to earnings posted Thursday morning.
• Elevance said the increase was due to charging its members higher premiums to cover elevated medical utilization, along with growth in its health services division Carelon — including the first full quarter of revenue from BioPlus, the specialty pharmacy Elevance acquired last year and began migrating scripts to in January. Elevance raised 2024 earnings guidance following the results, which bumped its stock to its highest level since October 2022.

Dive Insight:

Analysts said Elevance’s results were clean, especially compared to insurance rival UnitedHealth, which posted more complex results earlier this week. UnitedHealth’s claims clearinghouse subsidiary Change Healthcare was hit with a cyberattack in February that’s thrown provider payments into disarray, while restricting insurers’ visibility into claims.

UnitedHealth said it boosted payment reserves as a result, creating a buffer for delayed claims. Elevance followed suit, though “we were not significantly impacted by this,” CEO Gail Boudreaux told investors on a Thursday morning call.

That’s as Elevance’s prior authorizations, provider payments and pharmacy claims don’t flow through Change, Boudreaux said.

After Change took its systems offline following the attack, Elevance observed a 15% to 20% reduction in the daily volume of electronic data receipts from providers — most of which was related to claims — but the insurer caught up to standing claims volumes in the past few weeks, CFO Mark Kaye said on the call.

Elevance’s days claims payable, an indication of how long it takes an insurer to pay claims, increased 1.7 days compared to the prior quarter. That was mostly due to Elevance increasing its reserves after seeing slower claims receipts, Kaye said.

The scale of the increase is “encouraging,” commented Jefferies analyst David Windley in a Thursday note.

Elevance operates Blues-affiliated plans in 14 states, and Medicare and Medicaid plans through a subsidiary called Wellpoint. The insurer reported a medical loss ratio, a marker of spending on patient care, of 85.6% in the quarter. The MLR was little better than analysts expected thanks to Elevance hiking its premiums.

Like other major MA insurers, Elevance has struggled since early last year with a dogged increase in healthcare utilization among seniors —and a less-than-friendly regulatory stance from a Washington facing rising pressure to crack down bad actors in the private Medicare program.

Utilization remains elevated, but the premium increase covers it, Kaye said on Thursday. However, Boudreaux said she was “disappointed” in final MA payment rates released by the government earlier this month, which could cause the payer to reduce benefits for its members to preserve MA profits.

Elevance’s MLR could also have been worse due to heavier pressure from Medicaid redeterminations, analysts said. States have continued rechecking the eligibility of their Medicaid beneficiaries for the safety-net program, causing Elevance to lose almost 2 million members over the past year.

However, redeterminations are almost complete. An estimated 90% of Elevance’s members have had their eligibility rechecked to date, according to Felicia Norwood, who runs Elevance’s Medicare and Medicaid businesses.

Elevance is also seeing a “gradual increase” in Medicaid enrollment, and anticipates that continuing as improperly disenrolled members rejoin the coverage, Boudreaux said on the call.

Elevance has also been focused on building up its health services assets as it looks to catch up with UnitedHealth and CVS, which have a head start in pharmacy benefits and care delivery. Elevance’s Carelon division has steadily grown to account for more of the company’s bottom line, and reported income up 10% year over year in the first quarter.

Days before posting earnings, Elevance announced it was forming a joint venture with private equity firm Clayton, Dubilier and Rice to create a new primary care company combining their various care delivery assets with those of Carelon.

Elevance will hold a “significant minority position” in the shared business when it launches, “with a clear path to majority and then full ownership in the next five years,” Kaye said on the call.

When launched, the entity should have more than $4 billion in annualized revenue, according to Kaye.

Elevance has also embarked on a series of recent M&A to bolster Carelon’s offerings. Earlier this year, Elevance completed its acquisition of infusion services company Paragon, and agreed to buy Kroger’s specialty pharmacy business.