A majority of publicly traded US health insurers are expected to post sequential drops in revenue and earnings per share in the third quarter, according to an S&P Global Market Intelligence analysis of sell-side analyst forecasts.

Of the nine largest publicly traded US managed care insurers, all but three — UnitedHealth Group Inc.,The Cigna Groupand Molina Healthcare Inc. — are expected to report lower EPS from the second quarter, while seven are expected to log higher EPS year over year.

Over the last year, high costs associated with the senior-aimed Medicare Advantage plans have complicated earnings figures for major managed care insurers, and the plans are expected to be a focal point of the upcoming earnings season, according to a research note from J.P. Morgan analyst Lisa Gill and her colleagues.

"We expect focus on cost trends in the quarter, which will inform what trends are incorporated in 2025 bids and contextualize the ability for each company to hit their margin targets in 2025," the note said. "[UnitedHealth Group] kicks off earnings on Tuesday, October 15, and we believe that sentiment remains negative ... particularly around Medicare Advantage."

Centene Corp.and Humana Inc., which have been vocal about the headwinds posed by Medicare Advantage as well as Medicaid, are the only insurers projected to log both sequential and year-over-year drops in EPS.

Humana is additionally feeling the squeeze of changes to the quality ratings of its Medicare Advantage plans, which is expected to hurt future bonus payments the company receives from the US government.

According to the Centers for Medicare and Medicaid Services (CMS), Humana has roughly 1.6 million or 25% of its members enrolled in plans that are rated four stars or higher for 2025 — a sharp decrease from 94% in 2024. Humana noted that a substantial driver of the change is due to one of its larger contracts decreasing from a 4.5-star rating in 2024 to a 3.5-star rating.

In a note, Stephens analyst Scott Fidel said the news represented a "worst-case scenario result" for the company, and he downgraded Humana to equal weight from overweight. Analysts from BofA Securities downgraded Humana to underperform from neutral and Piper Sandler also downgraded Humana to neutral from overweight.

Medicaid

The other ongoing managed care woe expected to rear its head again is Medicaid redeterminations.

Medicaid redeterminations — the annual process during which states determine which low-income individuals and children qualify for government subsidized healthcare — resumed in April 2023 after years of COVID-19 related delays. It has, in some cases, resulted in the procedural disenrollment of thousands.

Some managed care insurers with more exposure to the program, like Centene, have felt the impacts in recent quarters, including shifts in acuity and higher costs.

However, a suggested Medicaid rate update should provide margin relief in the back half of 2025, according to Gill and her colleagues.

"Over the coming quarters, we do believe that [managed care insurers] have line of sight into improved rates from the states to reflect post-redetermination shifts in acuity," Gill and her colleagues wrote.

Revenues

Only three of the nine largest managed care insurers are expected to see sequential-quarter growth in revenue, with only Centene and Clover Health Investments Corp. forecast to log prior-quarter and year-over-year declines.

Revenues are largely expected to be up year over year, however, with only two insurers expected to report a decline from the third quarter of 2023.

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UnitedHealth Group Inc., Molina Healthcare Inc. and Oscar are projected to log higher revenue from the previous quarter and grow year over year.

Given its massive size, UnitedHealth occupies a unique role in the managed care space and is again expected to deliver double-digit earnings growth and high returns in capital over the next three to five years, Gill wrote.

UnitedHealth will kick off earnings season on Tuesday and will hold its second-quarter earnings call at 8:45 a.m. ET.