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Humana's revenue rises, earnings fall on exchange, drug costs


By Rachel Landen
Posted: July 30, 2014 - 12:00 pm ET
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Humana's investments tied to healthcare reform combined with high drug costs dragged its bottom line down roughly 18% in the second quarter, even as membership growth drove revenue higher.

The Louisville, Ky.-based insurer reported second-quarter earnings of $344 million, down 18.1% from $420 million in the same quarter the previous year. Humana, the fourth-largest insurer in the country based on total direct premiums, reported Wednesday morning that costs associated with healthcare exchanges and state based-contracts, along with expensive hepatitis C drug treatments, eroded earnings.

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Revenue for the quarter was up 18.4% to $12.2 billion from $10.3 billion in the second quarter of 2013. Revenue year-to-date reached $23.9 billion, up about 15% from $20.8 billion in the same period last year.

“Our second-quarter and year-to-date results show the effectiveness of our integrated-care-delivery model in driving robust membership growth in our Medicare, healthcare exchange and state-based Medicaid businesses,” Humana CEO Bruce Broussard said in a release.

Humana derives most of its revenue from the government-sponsored programs Medicare Advantage and Medicare Part D. Both added members during the quarter, while state-based Medicaid membership was up nearly 91% year-to-date. Individual commercial membership rose even higher, up 122% year-to-date, largely fueled by Humana's participation in the new exchanges created by the Patient Protection and Affordable Care Act. Overall, total retail membership for 2014 was up 27% to 7.7 million members.

Humana's medical-loss ratio, which reflects the portion of premiums used to cover health claims, fell slightly to 83.1% from 83.4%.

Follow Rachel Landen on Twitter: @MHrlanden


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