Strong results expected for US managed care insurers in Q1 as utilization eases

A majority of the largest U.S. managed care companies are expected to report year-over-year improvements in revenues and earnings when they release their first-quarter financial results.

Revenue for seven of the top nine publicly traded U.S. managed care insurers is expected to be up year over year, while six companies should see increases in EPS, according to an S&P Global Market Intelligence examination of sell-side analyst forecasts.

Magellan Health Inc. and HealthEquity Inc. are the only companies in the sector that are projected to see both earnings and revenues slide year over year in the first quarter.

The magnitude of earnings beats for managed care organizations is traditionally highest in the first quarter but tapers off as the year progresses, according to Credit Suisse analyst Eduardo Ron, who said health insurers were conservative when issuing their original 2021 outlooks.

Ron noted that several managed care companies that attended investor conferences in early March said utilization trends were in-line with, or better than, expectations. The decrease in COVID-19 cases and hospitalizations particularly seen in early 2021 bodes well for utilization trends this year, despite the uncertainty around Medicare utilization, the analyst said. Managed care companies with Medicare businesses also got a bit of a boost when President Joe Biden in mid-April signed a bill that postpones a 2% cut to Medicare payments until the end of 2021.

UnitedHealth Group Inc. was the first managed care company to report first-quarter results, setting the tone for the group. It increased its full-year 2021 net earnings outlook to $17.15 to $17.65 per share and adjusted earnings to $18.10 to $18.60 per share. First-quarter earnings from operations jumped to $6.74 billion from $5.0 billion year over year.

Cantor Fitzgerald analyst Steven Halper in a research note said UnitedHealth clearly benefited from the strong growth in Medicare and Medicaid membership. The analyst said the insurer was being appropriately conservative in its guidance for 2021 as COVID-19 still remains an uncertainty.