Healthcare conglomerates still largely thought of as insurance companies are increasingly reliant on other aspects of their business to drive financial performance, as evidenced by first-quarter 2025 earnings reports.
UnitedHealth Group's, Cigna's, Elevance Health's and Humana’s healthcare services divisions, which generally comprise primary care, pharmacy and pharmacy benefit manger operations, had strong quarters while trouble brewed in the core insurance business.
Related: Government health programs weighed on insurers in Q1
The health insurance sector is contending with a third consecutive year of elevated medical costs and utilization, especially in Medicare. A tougher regulatory environment under President Joe Biden that hasn't yet changed much under President Donald Trump, tighter standards for Medicare Advantage star ratings, lower Medicare Advantage payments and consumer backlash have contributed to margins that are disappointing investors.
Vertically integrated healthcare companies have invested heavily to build healthcare services segments, acquiring assets and expanding their offerings. It seems to be paying off, based on the results publicly traded companies reported in recent weeks.
“Those organizations and entities are starting to see some early wins financially,” said Ben Baenen, a partner at the consulting company West Monroe’s healthcare and life sciences division.
Significantly, Cigna subsidiary Evernorth Health Services — which includes Express Scripts, its market-leading PBM — provided 77.9% of the company's adjusted income from operations in the first quarter, up from 73.5% in the first three months of 2021.
Healthcare services represented a smaller share of operating income at UnitedHealthcare and Optum parent company UnitedHealth Group and Carelon parent company Elevance Health but the proportion has grown.
In the first quarter, Optum provided 42.7% of the UnitedHealth Group's earnings from operations, up from 39% in the same period of 2021. Elevance Health created its Carelon subsidiary when it changed its name from Anthem in March 2022. In the first quarter of 2025, Carelon was responsible for 34.5% of the company's operating gain up from 25.5% in the first quarter of 2023.
Humana established its CenterWell subsidiary in March 2021. The division was worth 19.5% of income from operations during the first quarter this year, slightly below what its unnamed healthcare services unit achieved in the first quarter of 2021.
Driving big business
There's no playbook for this strategy and each company is charting its own course while taking cues from rivals. And others, such as Centene and Molina Healthcare, are still mainly focused on health insurance.
Their competitors are benefiting from diversification.
Evernorth Health Services generated $53.7 billion in adjusted revenues, or almost four times as much as its Cigna Healthcare insurance subsidiary pulled in. The care delivery division achieved a 5.4% increase in adjusted net income while the insurance arm suffered a 4% decline.
Elevance Health's insurance business provided most of its revenue. But Carelon, which houses the CarelonRx PBM and assets such as primary care, pharmacy, palliative care and technology, is growing more important to the company's finances. Carelon’s operating gain swelled 37.5% to $1.1 billion while the insurance division slipped 3.1% to $2.2 billion.
Humana has been narrowing its focus to Medicare Advantage, in part by exiting the employer-sponsored health plan market and building up its primary care capabilities. The company owned 329 CenterWell clinics that treated 417,800 patients in the first quarter, 31.4% more than a year before.
CenterWell beat expectations as income from operations spiked 39% to $392 million and revenue rose 5.7% to $5.1 billion, although insurance continues to provide the most revenue and profit for Humana.
Similarly, UnitedHealthcare continues to generate the lion’s share of the company's revenue and earnings. Even so, the influence of its Optum healthcare services subsidiary is considerable.
Optum is the largest U.S. employer of physicians and continues to gobble up local primary care clinics and national providers such as Baton Rouge, Louisiana-based home health and hospice company Amedisys. The OptumRx PBM is also inking contracts with new clients and expanding offerings to current customers.
Internal strengths
These companies say managing various parts of the healthcare system — insurance plans, medical practices, pharmacies, and data and analytics divisions — helps them provide better, faster and cheaper care.
“Our unrivaled reach to consumers and our integrated business model allow us to establish deeper connections in the community and drive better outcomes. The combination of our capabilities across each of our businesses are what allow us to deliver on these promises,” CVS Health President and CEO David Joyner said on the company’s earnings call last Thursday.
However, some state and federal lawmakers are clamoring to break up these conglomerates. Meanwhile, the companies don’t appear to be slowing down.
“Our clients in the health insurance space, I think, are focused on, ‘How do they grow?’ whether it's their core current service offerings or expanding into new things,” said Rick Kes, healthcare senior analyst at RSM, a consulting company.
Cigna, Aetna parent company CVS Health and Elevance Health have been increasing specialty pharmacy capabilities and eyeing the biosimilars market, for example.
When they announced first-quarter results, Cigna and CVS Health outlined further forays into the market for glucagon-like peptide-1 agonist drugs, or GLP-1s, for weight loss.
Evernorth Health Services is creating a program to provide greater clinical support to GLP-1 patients and launching a home delivery pharmacy to dispense the medications. These companies, plus UnitedHealth Group, currently offer lifestyle modification programs to health plan sponsors that cover GLP-1s.
CVS Health and Humana have also joined Wegovy maker Novo Nordisk's NovoCare pharmacy network to provide the GLP-1 through CVS Pharmacy and CenterWell Pharmacy.
