Humana Wednesday reported a $480 million net income and higher-than-expected growth of its Medicare Advantage business that has been hit with higher costs.
Medicare Advantage plans, which are a big share of Humana’s business, contract with the federal government to provide extra benefits and services to seniors, such as disease management and nurse help hotlines with some also offering vision, dental care and wellness programs.
But Humana and rival operators of Medicare Advantage plans have been hit this year with higher costs in part due to seniors who put off getting medical care during the Covid-19 pandemic and are now returning for treatments. In Humana’s third quarter, benefits expenses were up more than $3 billion to $25 billion compared to $21.7 billion in the year-ago period.
“The elevated medical cost trend was partially offset by the impact of the pricing and benefit design of the company’s 2024 Medicare Advantage products, which included a reduction in benefits in response to the net impact of the 2024 final rate notice and the initial emergence of increased medical cost trends in 2023,” Humana said in its earnings report.
Humana said net income dropped to $480 million, or $3.99 a share, in the third quarter compared to $832 million, or $6.71 a share. Total revenues rose to $29.4 billion compared to $26.4 billion a year ago.
In prepared remarks issued along with company earnings, Humana’s management team, including chief executive Jim Rechtin, said the health insurer’s performance is improving, which allowed the company to raise its financial forecast for 2024 adjusted earnings per share to “at least $16.00 from our previous guidance of ‘approximately $16.00’, while also contemplating additional investments to support long-term value creation.”
Humana also raised its 2024 individual Medicare Advantage annual membership growth expectations by 40,000 seniors to a new target of 265,000. Humana ended the third quarter with more than 5.6 million individual Medicare Advantage enrollees.
“The improved membership growth is in part due to incremental marketing investments driving additional sales volume, particularly in our internal sales channel, which typically results in higher retention and higher lifetime value membership,” Humana management said in prepared remarks. “As we focus our efforts on driving high quality membership growth, we have been pleased to see our year-to-date growth disproportionally driven by growth in Florida, a heavily penetrated value-based provider market.”