13 Oct, 2022
US health insurers set for 'benign' Q3 as revenues point upward
By Tyler Hammel and Hassan Javed
Revenues for 11 of the largest publicly traded U.S. managed care insurers are expected to be up year over year in the third quarter, while seven should see their EPS increase, according to an S&P Global Market Intelligence examination of sell-side analyst forecasts.
However, for a second consecutive quarter, industry analysts expect a decline in sequential revenue growth for a majority of the largest U.S. managed care companies.
Managed care companies are set for another positive, if fairly benign, third quarter, as they have continued to see lighter-than-expected utilization of services, particularly related to COVID-19, according to an Oct. 12 analyst note from Credit Suisse.
UnitedHealth Group Inc. will be the first major managed care insurer to report its third-quarter earnings during an Oct. 14 earnings call. Credit Suisse analysts expect UnitedHealth to suggest that 2023 consensus EPS estimates are within its likely expected range and consistent with its target for generating 13% to 16% annual EPS growth.
The recently closed acquisition of Change Healthcare Inc. could possibly grow UnitedHealth's EPS, according to the note. The deal closed Oct. 3 following a multiweek trial during which the U.S. Justice Department attempted to stop the merger on the grounds that the deal could give UnitedHealth access to competitor data.
Four managed care insurers are projected to see a year-over-year decrease in EPS.
Although HealthEquity Inc.'s EPS is expected to fall year over year, it is the sole managed care company forecast to experience a sequential rise in EPS for the second consecutive quarter.
Cigna Corp. and Centene Corp. are projected to record lower EPS on both a sequential and yearly basis. Clover Health Investments Corp.'s EPS is expected to be flat quarter over quarter but lower year over year.
Q3 revenue
Sell-side analysts expect U.S. managed care insurers' third-quarter revenues to be up across the board on a year-over-year basis. However, most managed insurers, apart from UnitedHealth, Elevance Health Inc. and Bright Health Group Inc., are forecast to see lower revenues sequentially.
UnitedHealth is projected to see its revenues slightly grow to $80.54 billion in the third quarter from $79.68 billion in the second quarter. Elevance could record revenues of $39.01 billion in the third quarter, a small increase from $38.08 billion in the previous quarter. Bright Health brought in $1.79 billion in revenue during the third quarter.
Bright Health received a neutral rating from J.P. Morgan in an Oct. 6 analyst note. The company's vertically integrated model, which combines care financing a distribution with care delivery and technology capabilities was seen by the analysts as a boon to the company's long-term growth.
However, the analysts wrote that Bright's faster-than-expected membership growth in 2021 created operational pressures that limited claims visibility and are a cause for caution.
