ManagedCare3Q19Recap:ALessMessyQuarterSequentially;Initial2020OutlooksGiveInvestorsSighofReliefManagedCare|Quarterly■AllMCOsinOurCoveragePostedQ3EPSAheadofExpectations.MCOspostedanaverageEPSbeatofroughly9.4%relativetocons,rangingfroma1.0%beatforANTMtoa42.5%beatforWCG.Thebeatswerelargelydrivenbystrongtop-lines,asMLRwasmixed:CI,CVSandWCGpostedbetterMLRs,HUMandUNHwerein-line,andANTMandCNCwereworse.OnaY/Ybasis,allMCOsreportedanincreaseinconsolidatedMLR.TheY/YincreaseintheratioforallMCOsinourcoveragewaslargelydrivenbytheHIFmoratoriumandtheextrabusinessday(Monday)in3Q19.Beyondthesetwoitems,ANTMpointedtoimprovedY/YmedicalcostperformanceinitsMedicaidbusiness.CignapointedtoaY/YincreaseinMLRintheindividualmedicalbusiness(in-linewiththecompany’sexpectation).WhilediscussingY/YtrendsinMLR,CNChighlighteda100bpsMLRdragrelatedtotheIHSSprogramreconciliation,a50bpsdragrelatedtotheHIFmoratorium,a30bpsdragrelatedtoat-riskstatedirectedpaymentsinCaliforniaand10bpsrelatedtoother(includesHIXnormalization,theimpactofFidelis,andIowaMedicaid).CVS’HealthCareBenefitssegmentMLRbenefittedfromimprovementinthelowerendofMiddleMarketbusiness.HUM’sMLRwasimpactedbylowerfavorablePPD,aY/YincreaseinGroup&Specialtybenefitratio,partiallyoffsetbythebenefitrelatedtoHUM’sMAclinicalprograms,memberengagement,andlowerthanexpectedmedicalcosttrends.WCG’sMLRwasimpactedbynetorganicMedicaidgrowth,itsIllinoisplan’simprovedperformance,partiallyoffsetbyrateincreasesincertainmarketsandcontinuedoperationalexecution.■MedicareCostTrendsRemainedIn-LinetoFavorable.Duringtheir3Q19earningscalls,allMCOsreportedcommercialmedicalcosttrendsin-linetobettercomparedtotheirexpectations.UNHsaiditnowsees2019commercialtrendrunninginthelowerhalfoftherangeitoriginallyoutlinedlastyear.■2020CommentaryPositive.ANTM’scommentssuggeststhatit’scomfortableatthisearlydatewitha2020EPSrangeofroughly$22.50-$22.60.Cigna’scommentssuggestitiscomfortablewitha2020EPSrangeofroughly$18.00-$18.50.CNCcontinuestodescribe$4.79asareasonablestartingpo...
