Healthcare Payers Enjoy Rising Revenues, but COVID Is Still Taking a Bite Out of the Bottom Line | Press Release

COVID-19 continues to shape Healthcare Payer financials, business strategies and IT investment trends

If profit margins were a theme park attraction, Healthcare Payers would have experienced quite the roller-coaster ride in the last 18 months, according to Everest Group.

Payer margins spiked in Q2 of 2020—rising from 2.6% to 6.8%—as a result of COVID-19 induced deferment of non-emergent procedures. Then, in the second half of 2020, operating and net income dropped to 2.5% as healthcare utilization rebounded. In Q1 2021, healthcare payers reported substantial profits (4.1%) as higher enrollment in government plans drove strong revenue growth, especially for Medicare Advantage (MA) plans, though commercial enrollment was still below pre-pandemic levels. In Q2 2021, despite posting strong revenue growth, payers experienced a drop in operating and net income, with net profit margin falling to 3.2%, due to an increase in COVID-19 care costs for testing, treatment and vaccination. Some payers also cited acquisition costs to explain the drop in income.

These findings are examined in more detail in Everest Group’s recently published State of the Market Report, “Healthcare Payer Enterprise Insights – H1 2021.” In this report, Everest Group examines payer performance in H1 2021, focusing on industry- and account-level financial and Line of Business performance as well as key business and IT investment themes. Payers profiled in the report include Anthem, Centene Corporation, Cigna, CVS Aetna, Health Care Service Corporation (HCSC), Highmark, Humana, Kaiser Permanente, Molina Healthcare and UnitedHealthcare.

COVID-19 Continues to Shape Healthcare Payer Trends
COVID-19 has fundamentally altered the functioning of the healthcare industry by significantly changing who receives care and how they access it.

Evolution of Healthcare Payer Business Strategies

  • In 2020, healthcare payers began looking beyond the immediate issues of cost takeout and capacity utilization toward improving access to care through home care and telehealth capabilities. Payers sought to increase operational efficiency and enhancing member engagement through improved outcomes, increased productivity and lower costs for members.
  • In H1 2021, home care, telehealth and integrated, coordinated and preventative care emerged as key themes. Payers leveraged partnerships and acquisitions to enhance their capabilities and improve member experience. In addition, payers are expanding their Medicare Advantage business by offering virtual and digital health capabilities. Payers also report the launch of various initiatives to tackle vaccine hesitancy and expand vaccination coverage.

Shifting IT Strategies

  • In 2020, the COVID-19 pandemic accelerated the need to future-proof technology, and healthcare payers responded by investing significantly to modernize legacy systems and leverage artificial intelligence (AI), machine learning (ML) and robotic process automation (RPA) technologies to reduce operational inefficiencies and automate time-consuming processes.
  • In H1 2021, healthcare payers continued the modernization quest. More specifically, payers are modernizing legacy platforms by shifting to integrated, cloud-based platforms and cloud-native applications. The payer industry is leveraging blockchain-based public ledger technology to improve transparency and interoperability in healthcare.

***Download a complimentary abstract of the report here.***

About Everest Group
Everest Group is a research firm focused on strategic IT, business services, engineering services, and sourcing. Our clients include leading global companies, service providers, and investors. Clients use our services to guide their journeys to achieve heightened operational and financial performance, accelerated value delivery, and high-impact business outcomes. Details and in-depth content are available at http://www.everestgrp.com

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