A majority of publicly traded US health insurers are expected to post sequential drops in revenue and earnings per share in the second 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 two — Clover Health Investments Corp. and Alignment Healthcare Inc. — are expected to report lower EPS from the first quarter, while six 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, a trend that has continued to now, according to Francesca Mannarino, an analyst for Market Intelligence.

"We're seeing some industry factors at play, particularly within the government lines, and that is resulting in a more dampened view towards forward earnings and potential capital implications," Mannarino said. "For the second quarter, I'd expect a continuation of similar themes and trends from [the first quarter] and even from 2023 in regard to utilization within Medicare Advantage."

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

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.

Centene's leading market share in Medicaid is viewed as a strength by J.P. Morgan analyst Lisa Gill, who wrote in a research note that she expects "managed care penetration will continue to increase over time as states transition higher acuity, higher revenue populations to managed care."

Similarly, Gill expects Centene's involvement in Medicare Advantage to be a strength as demographic trends fuel membership growth over the next decade.

Revenues

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

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

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

"Unexpected acceleration of medical cost trends is notoriously difficult to forecast, and we believe it remains the single largest driver of volatility for managed care stocks," Gill wrote in a managed care preview note.

Given its massive size, UnitedHealth occupies a unique role in the managed care space, but it is still 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.