Humana's third-quarter profit soared 43.3% on better-than-expected earnings from its Medicare plans.
The Louisville, Ky.-based insurer said its individual Medicare Advantage business line improved over the quarter because of fewer claims.
But overall earnings were offset by the loss of a large group Medicare Advantage account that moved to a private exchange at the start of the year, as well as a decline in premium revenue from fewer individual commercial plan members.
Humana's Medicare premium revenue grew 4.2% to $10.05 billion in the three months ending Sept. 30 from $9.64 billion in the same period last year. And individual Medicare Advantage membership ticked up by 3.5% year over year to 2.8 million members as of Sept. 30.
The medical loss ratio in the retail segment, which includes Medicare as well as commercial plans, was 83.1% in the third quarter, compared with 86.1% in the year-ago period.
Last month, Humana's stock price tumbled after the CMS reported that the percentage of Medicare Advantage members in Humana's plans with four stars or higher fell by half, from 78% a year ago to 37%. Humana has vowed to appeal the ratings.
Like other national insurers, Humana has also had a rough time with the public health insurance exchanges and pulled out of several markets for 2017. The insurer will sell plans through the ACA exchanges in 11 states next year, down from 15 this year.
But the insurer was not hit as hard in its ACA exchange plans this quarter and related 2016 estimated losses remained unchanged. Humana's expected losses for its 2016 exchange plans, was $206 million as of Sept. 30.
Revenue in Humana's individual commercial plans, which include both on-exchange and off-exchange plans as well as non-ACA compliant legacy health plans, fell 9.8% to $882 million in the quarter compared with the year-ago period.
The insurer's on-exchange membership totaled 450,300 as of Sept. 30, down 26.1% from 609,600 at the same time last year. Total individual commercial membership, including both on-exchange and off-exchange plans as well as non-ACA compliant plans, totaled 726,200, down 24.6%, from the third quarter of 2015.
Humana's net income totaled $450 billion in the third quarter compared with $314 million in the same period last year. Its revenue increased slightly at 2.5% to $13.69 billion from $13.36 in the same quarter a year ago.
Humana's overall medical loss ratio was 81.5% in the third quarter compared with 83.9% at the same time last year. Total medical membership was 14.2 million at the end of the quarter, an increase of 36,000 members year over year.
“We continue to meet or exceed our initial 2016 earnings expectations across our portfolio of businesses, with the exception of our individual commercial business,” Humana President and CEO Bruce D. Broussard said in a statement. “We attribute this over‐performance to the effectiveness of our clinical programs and management's top priority of operational execution notwithstanding the elongated regulatory review of the Aetna transaction.”
Humana is slated to defend its planned merger with insurer Aetna in federal court beginning Dec. 5. The insurer said it “intends to vigorously defend the transaction” against the U.S. Justice Department's lawsuit brought earlier this year.