Humana may exit some individual exchange states in an effort to stop losses tied to the new Affordable Care Act policies, the insurer said Wednesday.
Humana also continues to reel after losing a large Medicare Advantage employer account. Those factors and others forced the first-quarter profit at the Louisville, Ky.-based insurer to fall 46% to $234 million.
Humana did not lay out exact plans for its ACA products other than saying it likely will raise ACA premiums heavily and ditch some on- and off-exchange policies in “certain statewide” markets. Humana did not hold an investor call because of its pending merger with Aetna.
If Humana ditches some ACA marketplaces, it would be the second major investor-owned insurer to back away from a key creation of President Barack Obama's healthcare reform law. UnitedHealth Group is leaving most of its individual exchange states for 2017. However, UnitedHealth didn't completely abandon the exchanges, and the individual market represents a very small slice of UnitedHealth's business, most of which is tied to employers and Medicare Advantage.
Other insurers, such as Anthem and Centene Corp., have fared better with the exchanges. But many Blue Cross and Blue Shield plans, key players in the individual markets, have suffered massive losses in the opening years because of high demand from a very sick population that previously was locked out of affordable health coverage.
Humana sells on- and off-exchange individual health plans in 16 states. As of March 31, Humana had 554,300 on-exchange ACA members and 208,700 off-exchange enrollees. People who earn up to 400% of poverty and purchase coverage on the ACA's exchanges are eligible for premium subsidies to lower their monthly costs.
As expected, Humana's on-exchange membership was down significantly in the first quarter compared with the same period a year ago, when it had almost 731,000 members. The first-quarter membership was also down from the end of 2015, when Humana had about 567,000 on-exchange enrollees.
But Medicare Advantage represents the lion's share of Humana's revenue and profit, and those segments still have some lingering questions. Taxpayer-funded revenue and membership increased within Humana's individual Medicare Advantage plans. Employer group Medicare Advantage plans, however, recorded lower revenue and membership.
The Medicare group losses stem from the Ohio Public Employees Retirement System, which shifted its retirees and spouses to a private insurance exchange this year instead of automatically renewing with Humana. Humana previously called OPERS a “large profitable account” and disclosed that a majority of OPERS members picked traditional Medicare and a supplement Medigap plan instead of Medicare Advantage.
At this time last year, health insurer stocks plummeted after Humana said it was recording higher-than-expected hospital admissions among Medicare members. Humana's medical-loss ratio was higher in the most recent quarter, due in part to the leap day, but the insurer said its Medicare claims so far “were positive relative to the company's expectations.”
Humana ended the quarter with $13.8 billion of revenue, with 74% coming from Medicare Advantage and Medicare Part D prescription drug plans.