Q2 2025 earnings for the top payors: the managed care mirage gets murkier

If you were hoping that Q2 earnings would bring clarity to the managed care mess, well — hope floats…right off the fiscal cliff.

UnitedHealth, Humana, CVS Health, and Elevance all reported in recent weeks. If there’s a common thread, it’s this: the managed care story is unraveling in real time, and the executives telling it are running out of spin.

The MA house of cards is shaking

Medicare Advantage margins are getting squeezed like lemons but don’t get excited. This is some bitter lemonade. UnitedHealth’s medical loss ratio (MLR) came in hot at 85.2%, up from 83.2% last year. That’s way above expectations. Humana’s was even higher at 89.3% while CVS was at 86.3%.

Elevance? Quietly posted a 600-basis-point year-over-year drop in earnings, blamed largely on — you guessed it — utilization. And their execs were first out of the gate this quarter, foreshadowing the pain that followed.

All the major payor explanations were the same: “more utilization.” You don’t say?  How many people have been talking about demand, an aging and sicker population, and a mental health crisis?  Meanwhile, health systems and physicians have created models with more patient appointments, more options for care, and made incredible clinical breakthroughs all while the payors have turned on more administrative burdens. 

Translation: seniors are going to the doctor… a lot.  Physicians and hospitals are finding efficiencies to respond to the demand, and they still have fewer overall clinicians actually treating patients.  Population health and treatment of disease are, of course, the whole point of healthcare.   But the managed care model, as it’s currently built, can’t sustain real access to care — especially when those patients have complex, chronic conditions. That’s not a utilization spike. That’s reality.

Stop calling it “headwinds” — this is a structural unraveling and a lack of trust

These aren’t blips. They’re systemic. Every earnings call sounded like a game of Mad Libs:

• “We saw elevated utilization in [outpatient care/behavioral health/home health].”
• “Our teams are working diligently on cost containment.”
• “We remain confident in the strength of our diversified platform.”

What we’re witnessing is the managed care business model hitting the wall it built for itself: growth through enrollment and risk score gaming, not by actually delivering better care or managing chronic conditions effectively.  Meanwhile, every payor is attempting to make the physician or health system take on the financial risk. Isn’t the entire business model of the insurance industry to… take on risk?  If the providers take the risk going forward and treat the patient, why oh why do insurance companies exist?

What’s next: denial, delay, and deflection

We expect payers to respond the way they always do: slow-pay, no-pay, or retroactive recoup. Denials will spike. Audits will multiply. Surprise policies have already hit your inbox. United’s most recent was to pay anesthesia groups’ employed nurse anesthetists 80% of the contract rate… effective 90 days from notification.  Can you imagine building out a business and signing a contract with a negotiated rate only to be told that the contract doesn’t matter (once again) because this is an “edit.”  No other business works this way.

Meanwhile, plan execs will whisper to Wall Street that “things will normalize” by 2026, while tightening the screws on your revenue in 2025. Don’t buy it.

What should providers do: four things

1. Price for the future, not the past.

If your 2025 or 2026 MA rates are based on assumptions from 2023, they’re probably underwater. Build in escalators. Push for case mix adjustments. Consider moving to partial or global capitation only if you have the infrastructure and data visibility to manage it well.

2. Know your true cost of care.

Payers are throwing around “value-based” contracts like candy, but you can’t manage risk if you don’t know your margins by service line, population, and site of care. If you can’t model that out, don’t sign.  Be wary of consultants telling you what other providers are doing and that you should do it too.  Are you them?  Do you have the same patients, doctors, infrastructure, and clinical tools?

3. Negotiate from strength.

The dynamic is shifting. Plans are desperate to preserve network stability especially in the MA space. If you’ve got access, outcomes, and patient loyalty, use it to protect your patients. Build the evidence now: clinical performance, access metrics, and outcomes that matter.  Should you really be participating in products that pay you less than cost?

4. Educate your patients.

MA enrollment is soaring and the whirlwind of open enrollment outreach by payors, navigators, and brokers has a lot to do with it. Don’t assume that your patients know the difference between a supplemental policy that closes the gaps in their Medicare coverage and a MA plan. Physicians and health systems have a real stake in helping patients choose to stay out of MA plans that may not be able to deliver the networks they offer during open enrollment.

Bottom line: the illusion isn’t fading, it’s gone

For too long, managed care plans have thrived by selling a story: that they can offer “better care at lower cost” by managing risk more efficiently than traditional Medicare. That story doesn’t hold up when actual patients need actual care — and the numbers don’t lie.

Q2 was the moment that story started to collapse in public view. Q3 and Q4? That’s when the real pressure hits.

If you’re a provider, now’s the time to act. The managed care model is changing. Either we shape it, or we keep getting shaped by it.