瑞信-美股-医疗保健行业-管理式医疗Q4预览：聚焦-2-26页.pdf
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Managed Care
4Q19 Preview: Eyes on 2020
Managed Care | Quarterly
Following our 2020 Managed Care Outlook, we are publishing our 4Q19 preview addressing
key topics of interest and expectations heading into Q4 earnings for the managed care group.
■ UNH to Kick Off MCOs 4Q Earnings on January 15
th
: UNH will be the first MCO to
report 4Q19 earnings (January 15
th
), setting the tone for the group. Based on intra-quarter
company commentary and our hospital survey results, we believe medical cost trends in Q4
have remained stable sequentially and in-line with expectations. While the sector must
absorb some incremental flu activity compared to the prior year, we still expect a solid
quarter for managed care companies. On a Y/Y basis, MCOs will benefit from the Health
Insurer Fee (HIF) moratorium and strong enrollment growth, primarily in Medicare
Advantage. However, there are several items which might be favorable or unfavorable to
earnings on a company-specific basis. For example, given its higher MLR as the year
progresses (seasonal pick-up) and higher membership retention, HIX could drive CNC’s
consolidated MLR higher on a Y/Y basis. Expectations for margin normalization in the
Individual business could be a Y/Y headwind for CNC and Cigna. Share buybacks should
continue to contribute to earnings growth for UNH, HUM, CI and ANTM.
■ We Expect a Solid Quarter for MCOs; However Flu is Likely a Modest Headwind:
There will be interest in the impact of flu-related activity on MLR in the quarter and
particularly looking ahead to 1Q20 (where leap year is already likely a further modest
headwind). CNC and HUM are the names in our MCO coverage most exposed to high flu
activity, and HUM recently indicated that the company is not very concerned about the
potential flu impact. By way of background, in 1Q18 when flu activity was particularly
strong, the impact on MLR ranged from 35-50 bps for MCOs (Cigna did not disclose the
impact). We estimate that more government focused names HUM and CNC had an 8%
and 9% impact, respectively, on 1Q18 EPS results, while more diversified MCOs, legacy
Aetna, ANTM and UNH had a roughly 5% EPS impact on 1Q18 results. In 1Q19, the flu
impact was minimal, in what was a more normal flu season. The last meaningful flu season
in a Q4 period was observed in 2014.
■ 2020 Commentary: Only UNH and CNC have issued formal guidance thus far. UNH’s
2020 EPS outlook calls for a range of $16.25 - $16.55, implying EPS growth of 12-14%.
CNC is guiding for adjusted EPS in the range of $4.64- $4.84. The CNC ranges assumed
the pending WCG acquisition is neutral to EPS, while excluding onetime integration costs,
financing and closing costs, as well as the impact of previously announced divestitures.
Additionally, the outlook reflects a $500 mln reduction in revs and $0.06 EPS impact
related to a delay in the North Carolina Medicaid start date from February 1 to October 1.
Anthem’s 3Q19 comments suggest the company is comfortable with a 2020 EPS range of
roughly $22.50-22.60. HUM expects double digit rev growth in 2020, primarily reflecting
MA membership growth and PMPM increases. HUM has not provided specific commentary
on margin progression but has said it anticipates being below its target individual MA
margin in 2020. CVS indicated at 3Q19 that the company is on track for its 2020 Outlook,
12 January 2020
Equity Research
Americas | United States
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS,
LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business
with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could
affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Research Analysts
A.J. Rice
212 325 8134
Eduardo Ron
212 325 7491
Caleb Harris, CPA
212 325 7458
Alexander Khan
212 325 7714
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