Cigna Corp. and Humana, both in the process of being swallowed up by larger competitors, each reported higher third-quarter earnings Friday. However, they also grappled with more expensive medical claims.
Cigna's profit in the third quarter inched upward by 2%, totaling $547 million. Revenue jumped 7% to $9.4 billion. Anthem said this summer it would buy Cigna in a deal valued at $54 billion, the largest-ever health insurance merger if it clears federal and state antitrust review.
A vast majority of Cigna's business comes from employers, especially medium-sized and large-group employers that self-insure and outsource the administrative work to Cigna. Other companies pass all of the risk onto Cigna, and Cigna also sells individual policies on the Affordable Care Act's exchanges. The medical-loss ratio for those commercial members rose from 78% in the third quarter of 2014 to 79.3% this year, which indicates more of the customers' premium dollars were spent on medical care.
Humana, meanwhile, reported $314 million in profit in the third quarter, an 8% year-over-year increase. Revenue, most of which is derived from its Medicare plans, went up 9% to $13.4 billion. Aetna is buying Humana for $37 billion.
Humana's total medical-loss ratio went up to 83.9% from 83.3% last year, mostly driven by high utilization from sicker-than-average individual exchange and Medicare members. Humana posted a net loss of more than 122,000 individual members year over year. The company signed up thousands of people with off-exchange plans, but 150,000 people had their individual coverage bought through an exchange terminated by the CMS due to a “lack of proper immigration documentation and/or income status.”
Humana said it will discontinue certain health plan products and exit some exchange markets but did not elaborate which plans or markets would be affected. About 100,000 members will lose coverage as a result, Humana said.