Humana faces a tough legal battle tied to the proposed merger with Aetna and sizable losses from its Affordable Care Act plans. Yet, the health insurer was able to record large profits in the second quarter due primarily to its Medicare plans.
However, Humana's Medicare Advantage business remains tied up in a litany of legal issues tied to its coding practices, and the company expects more whistle-blower lawsuits could pop up in the future.
Humana's net profit in the second quarter this year decreased 28% to $311 million. But after taking out the one-time gain tied to Humana's sale of Concentra last year, Humana's operating profit actually increased 19% year over year to $683 million despite the grim picture painted by the losses from ACA plans.
The Louisville, Ky.-based company has struggled mightily with the ACA exchanges and has vowed to slash on- and off-exchange policies next year. Humana's premium deficiency reserve, or expected losses, for its 2016 ACA plans sat at $337 million as of June 30, the company said Wednesday.
Each of the big five publicly traded health insurers have lost huge amounts of money on the ACA's marketplaces so far this year. Humana's merger partner, Aetna, said this week it too will curtail activity on the exchanges.
The ACA exchanges aside, Humana recorded a large upswing in operating earnings after improving the medical-loss ratio on its Medicare Advantage plans, which represent a vast majority of the insurer's revenue. For the past year, Humana's Medicare business has buckled under the weight of higher-than-expected claims costs and lost employer retiree accounts.
Humana, the second-largest Medicare Advantage insurer in the country, said its Medicare members have not gone to the hospital or doctor as much as originally anticipated. The insurer also has ramped up its clinical programs and chronic-care outreach “to reduce medical cost trend.”
But Humana's Medicare Advantage plans have faced criticism and allegations that they intentionally boost patients' risk scores to garner higher payments from the federal government. Many whistle-blower lawsuits have alleged such behavior exists within the company, and the U.S. Department of Justice is investigating Humana on its own.
A regulatory filing filed Wednesday reiterated Humana's belief that additional civil lawsuits could ensue from those ongoing cases and probes. Humana has disclosed the possibility of more cases tied to its Medicare plans for the past several quarters.
Humana ended the second quarter with $14 billion of revenue, up 2% from the same period last year. Revenue will increase more next year with its expanded Tricare contract. The company covered more than 14.2 million members, with 56% enrolled in a Medicare Advantage or a stand-alone Medicare Part D drug plan.