Humana is modifying its Medicare Advantage products for 2025 amid industrywide struggles with higher costs under the program, the company announced along with its second-quarter results Wednesday.
Medicare Advantage membership grew in the second quarter while total membership declined. Profits dropped, as well, despite improved revenue, Humana reported.
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“We are not realizing the full promise of the company,” President and CEO Jim Rechtin said during a call with investor analysts.
Humana is reassessing its Medicare Advantage offerings and the geographic locations where it participates to avoid unprofitable plans and markets, said Rechtin, who succeeded Bruce Broussard this month. The insurer also will raise premiums and trim benefits, he said.
Rechtin declined to estimate how many Medicare Advantage members will be affected, but said the company aims to recapture them in other Humana Medicare policies.
In May, Chief Financial Officer Susan Diamond said Humana expected to lose about 5% of its Medicare Advantage members next year, which would amount to a few hundred thousand people.
An unexpected spike in inpatient utilization during the latter half of the quarter, which continued into July, dinged Humana's finances. Executives cited the effects of the two-midnight rule, which requires insurers to cover inpatient stays when providers expect patients to remain in the hospital for at least two midnights. The company expects this trend to persist through 2024.
Accordingly, Humana's medical loss ratio, which measures the share of premiums spent on claims, rose from 86.3% to 89%.
The Medicare Advantage market has grown more challenging since patients began seeking postponed care after the worst phases of the COVID-19 pandemic, and as the Centers for Medicare and Medicaid Services took a tougher stance on financing and oversight. UnitedHealth Group, CVS Health subsidiary Aetna and Centene have likewise acknowledged pressures in their Medicare businesses this year.
CMS is expected to release Medicare Advantage bids for 2025 soon, which will provide a clearer picture of how the insurance sector is responding to these pressures.
Humana net income fell 29.2% to $679 million in the second quarter on a 10.4% increase in revenue to $29.5 billion. Membership declined 4.8% despite Medicare Advantage enrollment growing 6.6% to 6.2 million as Part D sign-ups fell and the company continued its exit from the employer-sponsored health insurance market.
Humana shares opened on the New York State Exchange on Wednesday at $365.13, down 10.8% from the previous day's closing price.
