Publicly traded health insurers' revenue nears $1 trillion mark

The largest publicly traded health insurers grew profits by a combined 66% in 2019, driven by the massive mergers and acquisitions several of them completed the year before.

Those deals boosted the group of seven companies' collective net income to $35.6 billion, according to Modern Healthcare's analysis of company earnings reports. Combined revenue increased 31% over 2018 to $913 billion.

The combined growth of the companies' top and bottom lines was propelled by deals with businesses other than insurance, including pharmacies and pharmacy benefit managers. These deals, which have escalated in recent years as insurers have sought to exert more control over healthcare spending, have made it harder to categorize the companies as insurers. Their operations are becoming much more varied.

"There are so many places where costs come from—the PBM, the hospital, the doctor's office—and everything is separate from each other. The vertical integration is an attempt to control more pieces of the cost while also growing scale," said Deep Banerjee, an insurance industry analyst with S&P Global.

Even insurers are reluctant to label themselves as such as they branch out into new businesses. Cigna Corp. CEO David Cordani has said he prefers the organization to be known as a "health service company." Cigna acquired pharmacy benefit manager Express Scripts at the end of 2018.

In addition to mergers and acquisitions, insurance companies' earnings were helped to a lesser extent by membership growth in government-sponsored health plans, including Medicare Advantage and managed Medicaid, Banerjee said. Medicare Advantage is growing rapidly as a generation of Americans turns age 65.

The seven companies' combined medical membership grew 1.7% to $165.4 million.

The analysis of financial results included Anthem, Centene Corp., Cigna, CVS Health, Humana, Molina Healthcare and UnitedHealth Group. It excluded insurer WellCare Health Plans, which was acquired by Centene in the first quarter of 2020 and did not report its full-year 2019 financial results.

Cigna and CVS reported the largest increases in net income, driven in both cases by acquisitions. In the wake of its Express Scripts deal, Cigna grew profit by 93.5% to $5.1 billion in 2019. Pharmacy giant CVS' take over of health insurer Aetna at the end of 2018 sent its 2019 net income soaring to $6.6 billion from a loss of $596 million the year before.

Anthem's net income for the year grew 28.2% to $4.8 billion thanks to the launch of its internal PBM IngenioRx, which it created in collaboration with CVS. Enrollment gains in Medicare Advantage and Medicaid also helped buoy results, the company said.

Meanwhile, Humana and Centene experienced significant earnings and revenue increases thanks to membership growth in government-backed health plans. Humana CEO Bruce Broussard told investment analysts that the company's individual Medicare Advantage membership in 2019 experienced "the highest growth we've seen in a decade." Humana has acquired senior-focused primary-care centers and home health and hospice operators to support its new members. The insurer's net income increased 60.8% in 2019 to $2.7 billion.

Centene's bottom line was helped by growth in its health insurance exchange plans and new state Medicaid contracts. It reported net income of $1.3 billion for the year, an increase of 46.4%. Centene's acquisition of rival WellCare, which closed Jan. 23 and was not included in 2019 results, ensures that its bottom line will continue to swell. Centene expects WellCare to jump-start growth in its Medicare Advantage business line.

UnitedHealth Group, one of the nation's largest healthcare companies, reported annual net income of $14.2 billion, an increase of 15%. The company's Medicare Advantage, care delivery and pharmacy benefit management services drove the increase.