Elevance Health sees higher revenue, lower profits in Q4

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Elevance Health saw revenues climb more than 9% during the fourth quarter of 2022, hitting $39.9 billion, up from $36 billion in Q4 2021. But profit was down 16.5% year-over-year, declining from $1.1 billion last year to $949 million in 2022.

Operating revenue was $39.7 billion in the fourth quarter of 2022, an increase of $3.6 billion, or 10.1% year-over-year. Operating revenue was $155.7 billion for the full year, representing 13.7% growth over 2021.

The increase in both the quarter and the full year, said Elevance, was driven by higher premium revenue due to membership growth in Medicaid, growth in Medicare Advantage and premium rate increases to cover overall cost trends.

While the profit decline was significant, Elevance maintained that the numbers still beat expectations from Wall Street.

Elevance president and CEO Gail Boudreaux said during a recent earnings call that its Affordable Care Act plans are now being offered in every county in its 14 Blue states. Business-wise, she said the focus is on optimization: Since COVID-19 ate into margins for commercial and Medicare health plans, the company has been repricing its risk in the commercial business. 

"We are enjoying improved reimbursement rates, risk adjustment revenue and star quality bonus payments in our Medicare Advantage business in 2023," she said.

"With January 1 renewals behind us in commercial, and the 2023 Medicare Advantage plan year underway, we remain confident in the margin recovery previously discussed and for the improvement in our commercial and Medicare businesses to more than offset anticipated member attrition in our Medicaid business when redeterminations begin on April 1st," said Boudreaux.

WHAT'S THE IMPACT?

Membership totaled about 47.5 million as of December 31, an increase of 2.2 million, or 4.8% year-over-year. Government business membership increased by 1.1 million year-over-year, driven primarily by growth in the Medicaid business and organic growth in Medicare Advantage. Commercial and specialty business membership increased by 1.1 million year-over-year, driven primarily by strong sales to fee-based employers.

During Q4, medical membership increased by 248,000, driven by organic growth in Medicaid, which Elevance attributed primarily to the suspension of eligibility recertification, as well as the acquisition of Vivida Health, which added 29,000 Medicaid members.

Operating cash flow was $1.5 billion, or 1.6 times net income in Q4, a decrease of $3.2 billion as compared to the prior year quarter. The year-on-year decrease was driven by the early receipt of premium payments from the Centers for Medicare and Medicaid Services in the third quarter of 2022, which were received during Q4. For the full year 2022, operating cash flow was $8.4 billion, or 1.4 times net income.

The benefit expense ratio was 89.4% in Q4, a decrease of 10 basis points year-over-year. Elevance said the decrease was driven by the realignment of certain quality improvement costs to match recent regulatory clarifications.  

Excluding the realignment, Elevance said its benefit expense ratio would have increased, driven by the non-recurrence of favorable out-of-period adjustment items in Medicaid in the prior year quarter, partially offset by improved medical underwriting performance in the commercial and specialty business.  

The benefit expense ratio was 87.4% for the full year of 2022, a decrease of 10 basis points year-over-year. That decrease, said Elevance, was due principally to the realignment of certain quality improvement costs. Excluding the realignment, the full year benefit expense ratio would have increased, driven by a shift in business mix toward Medicaid, which carries a higher benefit expense ratio than commercial and Medicare health plans.

THE LARGER TREND

Elevance Health is poised to acquire Blue Cross Blue Shield of Louisiana, having entered into a definitive agreement this week to snag the insurer, with BCBSLA joining Elevance Health's affiliated Anthem Blue Cross Blue Shield family of brands.

The two organizations said they're "aligned in a mission" to improve access, quality and affordability for Louisianans.

The previous acquisition that had been announced by Elevance was that of BioPlus, a comprehensive specialty pharmacy, in November. BioPlus provides a range of specialty pharmacy services for patients living with complex and chronic conditions, such as cancer, multiple sclerosis, hepatitis C, autoimmune diseases and rheumatology.

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com