Welcome to the latest edition of our health insurer financial update, “Pulse.” We aim to keep you informed about key market trends and dynamics that impact health insurer financial results and profitability. Earlier this year, we released our analysis of the Q4 2024 financials. In this article, we explore Q1 2025 net loss ratio and profitability trends for insurer business, earnings components, commercial and Medicaid membership, and market capitalization highlights.
Five trends driving public health insurers’ financial performance in Q1 2025
- Average reported profit margins increased, returning to early year levels. There was a 3.8% increase in the average profit margin from Q4 2024, largely due to a substantial increase in Cigna’s reported gains and Aetna CVS Health's return to profitability.
- Average loss ratios decreased considerably. Loss ratios decreased compared to Q4 2024, and are in line with the level reported in the first quarters of 2021-2023.
- Operating expense ratios increased relative to Q4 2024. Reported operating expense ratios were 1.0% higher than Q4 2024, though still below the levels seen in 2023 and prior years.
- Medicaid membership was relatively stable in the quarter. Medicaid membership only declined by about 14,000 members in the quarter, reflecting a significant deceleration in the losses experienced within previous quarters due to the eligibility redetermination process.
- Market capitalization increased before a drastic decline. As of March 31, 2025, the collective quarter-end market capitalization of the seven public healthcare companies we analyzed was higher than at year-end 2024. However, a drastic drop followed in subsequent months due to financial and regulatory issues faced by UnitedHealthcare.
Net income for public health insurers increased relative to Q4 2024
Overall, the unweighted average profit margin (net income/premium) for the four insurers of 5.3% is 3.8% higher than the Q4 2024 unweighted average and 2.1% higher than the Q1 2024 unweighted average of 3.2%.
UnitedHealthcare recorded a net profit margin of 5.8% in Q1 2025, a 0.2% increase versus Q4 2024, which is generally in line with margins experienced in 2023 and 2024.
Cigna saw a bounce back in their margin as it increased to 7.6% in Q1 2025, from only 1.4% in Q4 2024, the lowest point it had been since Q4 2020.
Elevance’s profit margin increased in the quarter from 0.9% in Q4 2024 to 4.5% in Q1 2025.
Aetna CVS Health saw a positive profit margin in the quarter as it increased from a loss of 1.9% in Q4 2024 to a gain of 3.4% in Q1 2025.
Average loss ratios fell 5.5% in Q1 2025 aligning with Q1 2024 levels
On average, the medical loss ratios (medical costs/premium) for all four large public companies that we analyzed were 5.5% lower in Q1 2025 than in Q4 2024. In Q1 2025, reported loss ratios were 87.3% for Aetna CVS Health, 86.4% for Elevance, 84.8% for UnitedHealthcare, and 82.2% for Cigna.
Overall, the unweighted Q1 2025 average loss ratio of 85.2% was 0.1% higher than the 85.1% average loss ratio reported in Q1 2024. The year-over-year impacts by carrier varied as Aetna CVS Health saw a decrease of 2.3% (from 90.4% in Q1 2024 to 87.3% in Q1 2025) while Cigna saw an increase of 2.3% (from 79.9% in Q1 2024 to 82.2% in Q1 2025), and Elevance and UnitedHealthcare reported small increases.
Average Q1 2025 operating expense ratios increased relative to Q4 2024
Operating expense ratios (operating expense/premium) increased by 1.0% from Q4 2024 to Q1 2025. This overall average increase was driven by Cigna, whose ratio increased by 2.6% from 5.9% in Q4 2024 to 8.5% in Q1 2025, and UnitedHealthcare, whose ratio increased by 1.2% from 4.2% in Q4 2024 to 5.3% in Q1 2025. The expense ratios of both Aetna CVS Health and Elevance were stable in the quarter.
Q1 2025 medical cost trends across leading insurers
Centene. The health benefits ratio for the quarter was 93.6%. Centene stated that this was driven by influenza-related costs that exceeded initial expectations.
Cigna. The medical care ratio in the quarter was 82.2%, which was below the full-year guidance. Cigna reported that the full-year medical cost ratio (MCR) is expected to be in the range of 83.2% to 84.2%, with the second quarter’s ratio expected to be toward the low end of the full-year range.
Aetna CVS Health. Reported medical benefit ratio of 87.3% in the quarter, which was 310 basis points lower than the prior year quarter, primarily driven by favorable prior year reserve development across all lines of business. Aetna CVS Health noted that medical cost trends were elevated but were showing early signs of stabilization. In addition, trends in Medicare were modestly better than expectations.
Elevance. Reported a benefit expense ratio of 86.4% within the quarter, an increase of 80 basis points year-over-year, primarily due to higher cost trends in the Medicaid business, partially offset by favorable seasonality in Medicare Part D. Elevance noted that cost trends were elevated, but manageable. Utilization patterns are aligning with the assumptions embedded in full-year guidance.
Molina. Reported a business-wide medical cost ratio of 89.2% for the quarter, which reflected strong medical cost management amid seasonal illnesses and continued utilization of long-term services and supports (LTSS), high-cost drugs, and behavioral health services. Molina also noted minor variations in their MCR across their various lines of business. Medicaid business had a 90.3% MCR for the quarter, due to seasonal illnesses and long-term services and supports (LTSS) utilization, largely offset by the first-quarter rate cycle. Medicare Advantage saw a medical cost ratio of 88.3%, in line with expectations, benefiting from favorable pricing and benefit adjustments.
UnitedHealthcare. Reported expectations for a full-year medical care ratio between 87% and 88%. Within the quarter, UnitedHealthcare noted that care activity in Medicare Advantage increased at twice the rate expected, driven primarily by physician and outpatient services; inpatient care increased to a lesser extent. While Medicare Advantage saw heightened trends, commercial and Medicaid care activity trends were in line with expectations.
Q1 2025 Medicaid stabilizes while commercial membership grows
In Q1 2025, total Medicaid membership for public carriers showed little change compared to Q4 2024, showing a return to stability following significant decreases driven by the redetermination of Medicaid eligibility. Notably, total Medicaid enrollment is still about 22% higher than at the beginning of the pandemic. Total commercial membership increased by about 3% over Q4 2024.
Centene. Medicaid membership remained stable at about 13.0 million members and 7.9 million Medicare Advantage members, reflecting stronger than expected retention during the open enrollment period. Added 1.2 million new Marketplace members in Q1, reflecting growth of over 28% since Q4 2024.
Aetna CVS Health. Medical membership was roughly flat in the quarter and ended at about 27.1 million. Declines in individual exchange and Medicare businesses were largely offset by growth in the commercial fee-based business.
Elevance. Ended the quarter with medical membership of approximately 45.8 million members, an increase of about 0.1 million since Q4 2024, driven by targeted expansion efforts and better-than-expected retention rates in Medicare Advantage. Elevance noted that while individual Affordable Care Act (ACA) membership grew about 11% year-over-year, they expect a moderation in membership during Q2 as effectuation rates on renewing members are tracking below initial expectations.
Molina. Ended the quarter with approximately 5.8 million members, an increase of over 0.2 million since Q4 2024, driven by substantial growth in marketplace enrollment.
UnitedHealthcare. UnitedHealthcare added 0.7 million new commercial, self-funded members year-over-year. They noted a decline in commercial insured due to individual exchange business, which was expected due to product pricing.
The chart below displays the changes in reported enrollment for the 16 most recent quarters for commercial and Medicaid for a set of public companies where counts were available on a consistent basis. In the quarter, total commercial membership increased by about 2.9 million. Medicaid membership remained stable at around 38.2 million.
Health plan capitalization fell as the S&P 500 Index gained in Q1 2025
From Q1 2024 to Q1 2025, the collective market capitalization of the seven public healthcare companies we analyzed experienced a reduction. Between March 31, 2024, and March 31, 2025, the combined market capitalization of these seven public health plans fell by 6.3%. During the same period, the S&P 500 Index grew by 6.8%, outpacing the healthcare companies by over 13%.
Led by Aetna CVS Health (+51.2%), Cigna (+16.1%), and Elevance (formerly Anthem) (+15.1%), healthcare companies saw a gain of over 9% compared to the S&P 500, which declined by almost 5% in the same period. Centene (-1.5%) was the only carrier tracked that saw a reduction in the period.
Since the end of Q1 2025, the collective market capitalization of the seven public healthcare companies we analyzed experienced a reduction of 28.2% compared to a gain of 6.2% seen in the S&P 500.
All carriers except for Centene experienced a decline in this period. However, the reduction in market capitalization for the healthcare companies was led by UnitedHealthcare, which has experienced a decline of almost 45% since the end of Q1 2025. This reduction was driven by a reported earnings miss announced during their April 17 earnings call, the resignation of UnitedHealth Group’s CEO on May 13, and reports on May 15 that it is being investigated over alleged fraudulent activities in its Medicare payouts.
Look out for our next in-depth Pulse newsletter in June 2025.