Humana's fourth-quarter top line buoyed by Medicare Advantage
(Updated at 11:50 a.m. ET)
Louisville, Ky.-based health insurer Humana recorded higher revenue in the fourth quarter of 2018, as it brought in more premium revenue from Medicare Advantage plans.
In a conference call with investment analysts on Wednesday, company executives said Medicare Advantage plans performed better than expected in 2018 and anticipate even more membership growth this year after a successful annual enrollment period for 2019 coverage, which ended Dec. 7.
Humana CEO Bruce Broussard said the "strong" Medicare Advantage rate notice, which gave plans a pay bump of 3.4% this year, coupled with a moratorium on the health insurer fee, allowed the company to enhance plan benefits for its seniors.
With those additional benefits, plus "deepened broker relationships," Broussard said the company expects Advantage membership to grow by 375,000 to 400,000 this year, or between 12% and 13% year over year. At the end of 2018, membership in Humana's individual and group Medicare Advantage plans was 3.6 million, up 7.9% over 2017. Of that total, individual and group Medicare Advantage membership grew 7.1% to 3.1 million and 12.8% to 497,800, respectively, over 2017.
Broussard said Humana is urging Congress to repeal the health insurer fee in 2020 and beyond, saying the return of the tax next year will lead to reduced benefits and higher premiums for seniors.
Humana didn't perform as well in its Medicare prescription drug plan business. Enrollment in its Part D plans fell 5.7% over 2017 to about 5 million. Broussard said competitors have imitated Humana's low-price, cobranded Part D plan with Walmart, and succeeded in taking market share.
"While it will take time, we intend to stay competitive and are working through alternatives to change the value proposition and impact the market," Broussard assured the analysts.
Beyond Medicare, enrollment in Humana's military services business soared to 5.9 million, almost double its enrollment in 2017, thanks to a new Tricare contract that went live at the start of 2018. But Humana suffered membership losses in its Medicaid plans and fully insured employer segment, mostly from small employers with less than 100 workers.
In total, Humana reported medical membership of 16.6 million at year-end, an increase of 18.4% over 2017.
Memberships gains and the higher revenue associated with more customers, particularly in the Medicare business, pushed Humana's fourth-quarter revenue to $14.2 billion, an increase of 7.4% over the same period a year ago. The increase was partially offset by lower revenue related to the insurer's exit from the individual insurance market at the start of 2018.
For the entire 2018 year, Humana's revenue totaled $56.9 billion, an increase of 5.8% over 2017.
Humana's medical loss ratio, which represents the amount of premiums spent on medical claims and quality improvement activities, was 83.4% in the fourth quarter, compared with 83% in the same quarter a year ago. And for the full year 2018, Humana's MLR was 83.5%, compared with 83% In 2017.
Net income for the fourth quarter nearly doubled over the same quarter a year ago to $355 million. But for the full year, Humana's net income decreased 31.3% to $1.7 billion, primarily owing to its sale of a closed block of commercial long-term care policies, which ended up costing Humana $786 million.
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