The Payer Digest 8/1/2025

Hi everyone, Claire here. This week’s edition of The Payer Digest pulls together earnings insights from the majors, CMS’s latest interoperability push, provider alignment dynamics, and premium shocks in Part D.

In Focus: Q2 2025 Payer Earnings

The Q2 calls are in from the major national payers, with top-line numbers mostly in-line with expectations, which is near-universal negative. One common thread throughout all of the reports was that old assumptions no longer hold. For years, MA growth, risk adjustment, and services diversification buffered payers from volatility. Q2 showed us those buffers are starting to wear thin. If risk adjustment tightens, MA remains squeezed, and services can't reliably offset losses, what’s the next play?

Common Themes from Q2 2025 Earnings

• Medical cost trends and utilization are structurally higher, especially in MA and Medicaid. We are seeing higher acuity, delayed care, and more complex populations as the new baseline.

• MA is no longer a margin lock for payers. MA is under immense pressure with rate change and coding audits eroding profitability across the board requiring payers to reevaluate their playbooks

• Risk adjustment is a necessary strategic function. Payers are responding to v28 and the ramping of DOJ audits and getting more focused on risk adjustment. AI will be at the forefront of many strategic plays in response to service intensity and coding.

• Medicaid Redeterminations continue to drag. Elevance, Centene and Molina all saw sequential enrollment losses.

• Part D is increasingly unprofitable. Plans like CVS and Molina flag IRA-drive cost shifts and rising drug spend.

• Services are no longer a reliable buffer. Elevance’s Carelon and Cigna’s Evernorth delivered solid results while OptumHealth took a massive hit, proving that vertical integration is not a guaranteed hedge.

Payer-by-Payer Breakdown

UnitedHealth Group
UNH is experiencing the same headwinds that have challenged other national payers over the past year: persistently high medical trends, flawed projections, and execution difficulties, especially in MA and VBC, are reshaping the company’s performance and strategy. Behind the earnings miss is a broader question: how much of UNH’s margin was built on arbitrage and how much can be preserved under a post-audit, v28 regime? The pivot to "AI-first" feels as much about reputational repair as it is about efficiency. The decision to shed 800k PPO MA lives is telling. That’s not just portfolio clean-up, I take that as an acknowledgment that some segments aren’t viable under today’s policy environment. Pricing for 10% medical trend in 2026 signals just how aggressively they're trying to reset.

CVS Health / Aetna
CVS Health beat estimates and raised guidance, but MA remains a problem. They are leaning into risk adjustment, booking reserves early, exiting unprofitable exchange markets and methodologically repricing their MA book. Aetna’s MA book still has exposure, especially on the Group side. Oak Street isn’t close to break even, and Part D volatility is only going to increase. The story this one of control and discipline but it will be interesting to see whether they can sustain it.

Centene
Centene reported earnings last Friday, weeks after pulling its guidance. They are the most exposed to Medicaid redeterminations, ACA pricing swings, and the broader federal funding pullback. Centene falls short when it comes to diversification and they will need to pivot as the Medicaid landscape shifts towards integrated models and value-based pilots. Historically, they’ve been a volume-first operator which will not be enough if CMS starts tying payments to outcomes or care coordination.

Cigna
Cigna beat earnings expectations with reported revenue of $67.2 billion, up 11%, while net income was flat at $1.5 billion The payer said that the modest improvement in its bottom line was a result of the growth at its Evernorth Health Services business which we can expect them to keep leaning into to drive profits. But all of the regulatory momentum is heading towards PBM transparency, rebate reform and vertical integration limits which, if that actually lands, Cigna might not have much to fallback on.

Humana
Humana was one of the first to share positive results, reporting strong revenue growth, customer retention in its MA program, and finalized divestiture of Kindred which simplified their portfolio. It reported revenue of $32.4 billion, up 9.6%, and net income of $543 million, down 20%. They are betting that tighter management, better care coordination, and fewer distractions can offset MA margin pressure. This strategy could work but it is dependent on CMS rates and if supplemental benefits or home health take hits. Centerwell Pharmacy is another bright spot for the company, they are outperforming on D2C volumes and specialty pharmacy. They do not have diversification and therefore little room for error. As MA retention improves and guidance tightens, can Humana break out from a volume‑constrained model and meaningfully broaden its risk-adjusted margin playbook?

New News

• CMS finalized a 2.6% increase in Medicare inpatient hospital payments for FY2026, up slightly from the 2.4% proposed in April. That amounts to roughly $5 billion in additional payments. Hospitals will take the increase, but the American Hospital Association (AHA) continues to argue that labor costs and inflation are far outpacing Medicare updates. This is a win for hospital margins on paper but at the same time CMS is signaling that cost control still falls on the delivery side which matters for payer-provider negotiations.

• Medicare Part D premiums are set to rise in 2026 as the federal subsidy that helped stabilize 2025 Part D premiums is being cut by almost half. Plans will now bear more direct liability for high-cost drug users, with less government reinsurance support, and will likely respond by repricing aggressively and trimming formularies.

• CMS pilots national provider directory to address “ghost networks”. They are testing this out, starting in Oklahoma. The goal is to create a single source of truth for provider data, helping to reduce outdated listings in payer directories and minimize network transparency issues. This comes in response to long-standing complaints around “ghost networks”, where plans list providers who are not accepting new patients, are unreachable, or are out-of-network. Senate Finance Committee research last year stated that only 18% of mental health providers listed were actually available. For payers, this could mean new compliance costs and IT investments, and potentially a reevaluating narrow network plans.

• CMS and the White House announced that over 60 companies, including all the big tech names and a few notable health players, are signing onto a new initiative to “create a patient centric healthcare ecosystem.” AI has been the topic for a while now but most recently it has been even more present in the news after many big payers referenced the pros and cons in their Q2 earnings calls. It will be interesting to see how this one plays out.