The national insurers' financial performance in Q1 2025: Temporary reprieve or signs of stability?
- Jordan Peterson
- Jun 4
- 14 min read
Updated: Jun 5
Over the course of the past few weeks, all of the large, publicly-traded health plans have hosted their first set of earnings calls for the year, sharing their performance from Q1 and their outlook for the remainder of 2025. We always track financial performance of this industry sub-sector—it's an important indicator not only of the financial prospects of the health insurance industry itself, but also offers important clues as to the nature of ongoing demographic shifts, the margin outlook for providers, the real-world/cost implications of innovations from the drug pipeline, and the state of the regulatory environment. So in today's post, we’ll look at the "Big Five" national insurers’ financial performance in Q1 2025, talk about the major moves they've made to address recent profitability challenges, and outline what we’re watching moving forward.
Read on to get our full commentary, our use the links below to jump to a specific area of interest:
The national insurers’ financial performance in Q1 2025 appears to improve after a few challenging quarters—with a notable exception
Insurers had a (relatively) strong showing in Q1 of 2025. This comes after several consecutive quarters in which higher utilization, rising medical and drug costs, and regulatory shifts challenged payer financials. In response, insurers have spent the past year-plus shifting their focus from enrollment growth to cost management and operational efficiency.
And it appears those efforts may finally be paying off. All of the major insurers were profitable in the first quarter and nearly all exceeded Wall Street expectations. UnitedHealth Group was the notable exception—the only national insurer to fall short of expectations, for reasons we’ll get into later on.
Despite improved performance overall, insurers continue to feel pressure, mostly from elevated utilization and increased medical costs. We see that play out in increased year-over-year medical loss ratios (MLRs) for three of the five insurers (United, Cigna, and Elevance). And although both Aetna and Humana saw year-over-year improvements in their MLRs, their MLRs still remain high on an absolute basis—i.e. the improvement is only relative to the extremely high levels they experienced across the past year.
The Medicare Advantage (MA) market, in particular, continues to be a major source of tension for insurers, especially Humana and UnitedHealthcare, the two leading MA plan providers nationwide. While MA has long been considered an industry cash cow, recent changes to the reimbursement methodology—particularly to the Hierarchical Condition Category (HCC) model and the star ratings system—have constrained plan revenues. And despite a more-generous-than-expected first rate update under the Trump administration, the new administration also opted to keep the aforementioned Biden-era changes to the reimbursement methodology, meaning plans will only receive partial, and potentially temporary, relief.
By contrast, Medicaid acuity and utilization challenges appear to have subsided somewhat. This is a marked shift, as insurers had struggled to manage the impact of Medicaid disenrollment since it the process began in 2023, and which had largely led to younger/healthier individuals falling off the Medicaid rolls, leaving older and/or sicker beneficiaries behind. (Spoiler: This relief may be temporary and could very well reemerge with the risk of Medicaid cuts in the pending [big, beautiful] tax bill).
Something else that didn't feature heavily (if at all) in the earnings calls themselves, but that undoubtedly contributed to insurers' performance improvement: denials. Insurers have obviously used claims denials as a tool to manage costs and control their MLRs for years, ratcheting up focus on this particular profit lever in difficult financial times. And this practice has only become more common with recent advancements in AI. And while providers, for their part, continue to ramp up efforts to appeal said denials (often successfully!), the drawn-out nature of this process increases accounts payable days (the insurers' version of accounts receivable days) and helps boost short-term earnings and MLR numbers. It's not surprising that payers themselves aren’t heavily advertising denials in their earnings calls. The industry faced considerable public backlash against denials leading up to and following the killing of Brian Thompson, UHC's CEO. (Note: UHC notoriously leads the pack when it comes to denial rates.) The public scrutiny was so strong that UHC even purportedly backed off its typical denials practices, as we’ll discuss in more depth later in the post.
With all of the challenges on the traditional payer business model, we've seen some players, most notably Cigna and CVS Health, shift their focus toward pharmacy and specialty services. This play may initially seem at odds with the growing bipartisan interest in controlling drug prices, but insurers are making a couple of bets. First, and most simply, they are betting on continued growth in pharmacy spend, especially specialty pharmacy. Second, because insurers are not generally manufacturing the drugs, their pharmacy revenues are not wholly tied to the price of the drugs themselves—services such as patient support platforms, therapy management offerings, or care coordination systems also generate indirect revenues and may even directly speak to purchaser desires to control specialty drug spending. Finally, continued investment in this space signals the general industry skepticism as to any large-scale, structural pricing impacts from ongoing drug reforms, which to-date have largely focused on consumer out-of-pocket exposure to non-specialty drugs.
Insurers are pulling from similar playbooks to address financial pressures
In sum: while insurers have made concerted moves to improve their financials, it's also obvious that none of them are “in the clear” yet. We expect to see continued emphasis on cost management and operational efficiency throughout 2025. Insurers’ response have tended to fall into three main categories:
Cost containment in the form of restructuring, large-scale layoffs, and buyouts.
Strategic exits from unprofitable markets, most notably MA and Affordable Care Act (ACA) exchanges.
Adjusting product offerings to remain competitive and financially stable.
The graphic below outlines the various moves insurers have made across these three categories, with a few callouts to ongoing legal challenges related to plans' efforts to stabilize finances.
Deep dives on the national insurers
While there are common themes across the "Big Five", each of course has its own unique points of tension—and areas of strength.
Cigna
Financial outlook
Cigna had a stronger-than-expected Q1: revenue grew year-over-year to $65.5 billion, while MLR came in at 82%, a slight decrease over the past year. Like its peers, Cigna's leaders acknowledged elevated utilization as an ongoing challenge and largely attributed overall improved performance to specialty pharmacy growth in Cigna's Evernorth Health Services (i.e., non-insurance) division.
Recent moves
Strategic exit: Divested Medicare business
Cigna’s most notable strategic exit came in March of this year, when the company completed the divestiture of its MA business to Health Care Service Corporation (HCSC). Cigna originally began shopping around its Medicare business in 2024 after it struggled to meet margin goals, and the move isn’t entirely surprising given that Cigna was a relatively minor player in the MA space, with only a small percentage of its total members in MA plans. (And despite the sale, Cigna will still have a foot in the Medicare business through its health services division, Evernorth.) Cigna plans to use the proceeds from the $3.7 billion deal to repurchase shares and invest in its core (i.e. more profitable) health services and commercial segments.
Product adjustment: Two new programs in high growth, high margin pharmacy and specialty services
As part of its renewed focus on core segments, Cigna is homing in on high-growth, high-margin pharmacy and specialty services. Cigna’s Evernorth launched two new programs earlier this year to expand its GLP-1 suite of solutions, an expansion that is driven both by continued market demand and growing payer concerns about the high cost of these drugs.
EnReachRx: A patient support program designed for pharmacies that are committed to providing enhanced clinical services alongside dispensing GLP-1 drugs.
EnGuideRx: A new specialized pharmacy for GLP-1s staffed by clinicians with expertise in managing those drugs.
Take note: Cigna’s shift away from MA and into pharmacy and specialty services is a theme we’ll see play out for our next player as well..
CVS Health
Financial outlook
CVS Health had a particularly hard year in 2024, which makes its relatively strong start to 2025 even more notable. Its Aetna insurance arm was one of the few insurers that saw an improved MLR relative to Q1 of 2024, with MLR coming in at 87.3%, a decrease of 3 percentage points (of course—this is still high and only an improvement relative to the truly dire state Aetna found itself in in early 2024—but nonetheless marks a move in the right direction). Like Cigna, CVS beat Wall Street's expectations and raised its full-year 2025 guidance.
CVS attributed its performance improvement to strong cost management and increased star ratings within its MA book of business.
Recent moves
Cost containment: CEO replacement and multiple rounds of layoffs
CVS Health's Q1 performance follows the replacement of its CEO, Karen Lynch, last October. Lynch had been CEO for four years, but stepped down after CVS' ongoing challenges within its core retail pharmacy business and difficulties controlling cost on the insurance side, the combined impact of which led to falling share prices. Lynch was replaced with David Joyner, who had joined the company in 2023 as executive vice president of CVS Caremark.
In another common move across the "Big Five," CVS executed multiple rounds of workforce reductions across Q4 2024 and Q1 2025 in response to rising costs and falling share prices. Last year, CVS Health laid off nearly 3,000 employees (primarily corporate positions), about 1% of the company’s overall workforce. These cuts came as part of a larger $2 billion cost-saving initiative. There are no signs that the cuts are slowing down, with multiple rounds of layoffs announced in the first quarter of this year, including 164 Aetna employees in February 2025 and dozens more from the corporate Rhode Island headquarters. Those layoffs will be effective in June 2025.
Strategic exits: Leaving individual exchanges and unprofitable MA markets
In March, CVS Health announced plans to exit the ACA health insurance exchanges for 2026. This exit follows underperformance in the individual markets and reflects CVS Health’s broader strategy of reducing its exposure in unprofitable areas (Aetna also announced that it would exit unprofitable MA counties in 2025). The company acknowledges that these moves could lead to overall declines in Aetna's enrollment, but that they are currently prioritizing “margins over membership."
Product adjustments: Expanding GLP-1 services
Like Cigna, CVS Health’s strategic exit from unprofitable MA markets coincides with a focus on pharmacy and specialty services—specifically GLP-1 drugs. In March 2025, CVS Caremark, its PBM division, made formulary updates to improve access to GLP-1 drugs in an effort to meet demand and manage costs.
Elevance Health
Financial outlook
Elevance Health reported $48.9 billion in revenue and $2.2 billion in profit in Q1, the second highest among the five insurers. However, like many of its peers, it saw a slight uptick in its MLR.
Leaders reassured investors that the elevated medical costs are “manageable and in line with internal expectations." Specifically, they reported that MA costs were higher early in the year due to flu and respiratory illness but appear to be normalizing.
Recent moves
Cost containment: Thousands laid off across 2024 and 2025
Elevance Health has been executing ongoing layoffs since late 2023, with workforce reductions aimed at streamlining operations and managing costs. The layoffs continued throughout 2024 and are expected to continue through at least Q2 of 2025. Exact numbers have not been disclosed, but it’s reported that the reductions have impacted thousands of employees across multiple states and business units.
Outside of widespread layoffs, Elevance Health is keeping its playbook closely guarded, especially compared to our next two players.
Humana
Financial outlook
Humana saw a surprisingly strong performance in Q1 2025, with $32.1 billion in revenue, just below Wall Street estimates, but above last year’s Q1 performance. Humana was the only other major insurer (besides Aetna) whose MLR came down from last year, coming in at 87%—still high on an absolute basis, but trending in the right direction.
Humana’s performance was better than many anticipated considering the sharp drop in its MA star ratings and its ongoing legal battle around those ratings (more on that below). Leaders credited its Q1 2025 performance to outperformance in CenterWell, Humana’s pharmacy, primary care, and home services segment. CenterWell saw steady growth in its primary care division, with 27,300 new patients in the first quarter. Its specialty pharmacy business also saw steady growth—CenterWell Pharmacy was selected as the fulfillment pharmacy for NovoCare Pharmacy’s weight loss medication for cash pay customers.
Its better-than-expected performance notwithstanding, Humana will continue to face headwinds across the remainder of 2025. Leaders acknowledged that performance was due partly to a “shift in expected timing of certain administrative expenses and incremental investments." Those expenses will be realized later in the year, temporarily (and unexpectedly) boosting performance in Q1.
Recent moves
Cost containment: Incremental layoffs across 2024 and 205
Like Elevance Health, Humana executed layoffs across 2024 and 2025 that impacted multiple business segments across multiple states. This was a direct response to its profitability challenges in its MA book of business.
Strategic exits: Exiting MA markets among an ongoing legal battle over star ratings
As a result of said MA challenges, Humana announced in September 2024 that it would exit several underperforming MA markets to focus on higher performing, more profitable markets. As a result, Humana expects to lose more than 500,000 MA members (roughly 10% of its current MA membership). Leaders have stated that this decline in enrollment will be offset by growth in standalone Medicare prescription drug plans and Medicaid—markets that will be a heavier strategic focus moving forward.
Humana’s MA exits come alongside a legal battle with the federal government over the program’s MA star ratings, after one of Humana’s largest contracts saw a drop from 4.5 stars to 2.5 stars due to CMS's updated methodology. This was the largest rating drop of any of the major MA insurers. And unlike others, Humana hasn't been able to secure a revised rating (by contrast, UnitedHealth and Centene both got higher revisions in December 2024 after filing their own lawsuits). Most recently, in April, CMS rejected Humana’s internal administrative appeal to change its rating. There still hasn’t been a decision on the lawsuit.
Product adjustments: Ongoing efforts to improve star ratings.
Humana’s leaders reported that they are making “significant investments” in improving star ratings performance and will continue to diversify business lines and restructure operations to mitigate risk.
UnitedHealth Group
Financial outlook
UnitedHealth Group's performance is undoubtedly the biggest story following the release of plan's Q1 2025 earnings reports. UHG led the industry in quarterly revenue ($109.6 billion) and profit ($6.3 billion), but missed Wall Street expectations—its first miss in over a decade. UHG ultimately withdrew its 2025 financial outlook, signaling uncertainly and causing its stock prices to tumble. It's hard to overstate the significance of these events, given that UHG is famously a finance-driven enterprise. Matching strong earnings performance to high expectations is the main reason it has been a blue-chip stock for a generation.
UHG's performance seems to have stemmed from a series of miscalculations, especially in MA. When (new) UHG CEO Stephen Hemsley, addressed investors earlier this week, he boiled the recent performance woes down to the fact that that UHG has "gotten things wrong" and "underestimated care activity and cost trends and generated outsized growth". These miscalculations included:
Difficulty adapting to the new MA risk-adjustment model (commonly known as V28): Leaders acknowledge that United struggled with its transition to the new model.
Higher-than-expected MA utilization: MA utilization was twice the amount United had predicted, concentrated in physician and outpatient spaces. (Utilization in the commercial and Medicaid businesses were as expected.)
Lower-than-expected MA reimbursement: Optum Health, United's care delivery division that serves Medicare patients (mostly UHC MA enrollees), grew as patients moved from market-exiting plans to plans (like UHC) that contracted with Optum provider services. UHG leaders purportedly underestimated how different the engagement behavior of these patients would be relative to Optum's typical MA patients, so reimbursement was "likely not reflective of their actual health status" and below United's expectations.
Of course, UHG was not alone in grappling with the shifts to MA reimbursement and utilization. But they appear to have felt the impact of those changes in an outsized way, for a few likely reasons:
First, UHC is simply more exposed to MA-related challenges, because MA makes up a full 15% of UHC's membership (and a far higher share of UHC's revenue base). And unlike other insurers, UHC didn't appear to pull back from unprofitable MA markets in a big way—if anything, UHC leaned into its MA business, picking up enrollees from other insurers who were exiting markets.
Second, UHC likely pulled back on denials in wake of Brian Thompson's killing. That meant that UHC couldn't rely on one of insurers' simplest and most effective short-term cost management levers.
Finally, it appears that UHG, as large and diverse as it has become, may ultimately be struggling with the operational complexity of its interconnected assets.
Recent moves
Cost containment: UnitedHealth Group CEO steps down
UnitedHealth Group’s CEO, Andrew Witty, stepped down in May. This development followed a particularly challenging year for UnitedHealth (including the Change Healthcare cybersecurity attack in February 2024 and the killing of Brian Thompson in December 2024). Witty has been replaced with Stephen Hemsley, the company's executive chairman and former CEO from 2006-2017, a move which likely signals a "back to basics" approach for the organization.
Witty’s departure also followed a lawsuit filed by UnitedHealth Group’s shareholders, in which the shareholders called out UHG’s leadership for maintaining prior earnings guidance, despite backing off of denials in response to the public blowback to Brian Thompson’s killing. Keep in mind that UHC reportedly had been the market leader in denials rates, so pulling back on denials practices like would have had a particularly marked impact on its underperformance (or at least lack of recovery) relative to its peers. The lawsuit was dropped last week, but highlights the particular tensions facing UHG as it tries to balance financial performance and shareholder obligation with intensifying public and regulatory scrutiny on its business practices.
Like all the other insurers we’ve covered, UnitedHealth has been executing layoffs. Most recently, the company offered buyouts in February to employees who left their job by March 3rd. The company did not disclose how many employees accepted the offer, but public speculation suggests that as many as 30,000 employees—and possibly more—were offered the buyout.
Product adjustments:
In response to higher-than-expected utilization and reimbursement challenges, leaders reported that they are “investing significantly in improving physicians’ clinical workflow” to more effectively transition to the new CMS risk scoring model. The nature of those exact investments haven’t been announced.
What we’re watching
1) How much runway do plans have when it comes to vertical consolidation?
On the one hand, it appears that insurers are increasingly relying on their non-insurance business segments to drive financial performance. We saw that play out with Cigna and Humana especially, with both organizations' health services divisions carrying their Q1 earnings. It looks like plans are doubling down on this approach as many are dialing up investments in pharmacy and specialty services. That said, there are open questions about how well this approach will work, especially given that UnitedHealth Group—long the industry poster child and market leader when it comes to vertical consolidation—continues to struggle despite it immense and well-diversified portfolio.
For more on this topic, we've covered each player’s approach to vertical consolidation in a 5-part blog series.
2) Will MA reimbursement continue to erode—or will plans' responses prove sufficient to maintain profitability?
As noted earlier, the current administration—contrary to expectation—is so far opting to maintain the Biden-era reforms that have been constraining plan revenues (we covered this in more detail in another recent blog). In addition to pulling back on MA portfolios in particularly unprofitable markets, plans are purportedly making investments to respond directly to the ongoing changes to the HCC and star ratings models. It's not yet clear whether those investments will prove sufficient to maintain profitability, or whether plans will need to continue to scale back their MA portfolios.
This question may be particularly acute for those who have tried to offset enrollment declines in MA with growth on the Medicaid side of the business, given signs of trouble on that front...
3) Will the Medicaid reforms within the "Big Beautiful Bill" pass Congress?
Whether Medicaid sees significant reforms effectively hinges on whether the overall legislation passes. It would be virtually impossible to pass the Republican-proposed tax cuts (at least as they currently stand) without targeting Medicaid for savings—especially because Trump has explicitly promised not to touch Social Security or Medicare.
The House-passed bill proposes deep Medicaid cuts, including adding work requirements and restrictions on states’ ability to raise funds for Medicaid through provider taxes. These changes would almost certainly result in substantial enrollment declines, particularly among younger and healthier individuals. If these enrollees leave, the Medicaid population would likely (once again) skew older and sicker, likely worsening the utilization, acuity, and MLR challenges that health plans have grappled with in recent years.
Parting thoughts: The national insurers' financial performance in Q1 2025
The big question overall is if the relatively positive Q1 2025 results are a sign of what’s to come (i.e. stabilization), or a blip/momentary improvement amid a financially-challenging time for insurers. Across 2024, health plans found themselves in a tight, almost desperate, spot, squeezed by pricing, utilization, and acuity. To combat this, they reverted to tried and true playbooks of cost containment and slowing payment, but now with an arsenal of new AI tools. Given their tech advantage, we think continued modest recovery seems likely, but legislative and regulatory changes could quickly erode any progress they’ve made in 2025.
Want more on this topic?
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