Humana Profit Falls to $162 Million as Medicare Advantage Costs Increase

Humana said third-quarter net income totaled $162 million, pressured by higher medical costs tied to older adults in its Medicare Advantage business.

As with many of its competitors in the health insurance industry, the company has been working to contain rising expenses in its health plans. The results showed the pressure remained elevated, with Humana's insurance benefit ratio, the share of premium revenue spent on medical care, reaching 93.7%, compared with 91.1% in the same period a year earlier.

Several health insurers have seen medical loss ratios climb to 90% or more as doctors and hospitals handle a wave of patients catching up on delayed care. The industry would generally prefer those ratios to stay below 90% and in the mid-80% range, where they were less than two years ago.

Humana said its benefit ratio was affected in part by the more than 1 million members it added to its Medicare Advantage plans this year, noting that the new enrollees tend to have a higher benefit ratio than retained members.

Even so, the company said the ratio was still “favorable to management’s guidance of ‘slightly above 94 percent.’” Humana also lifted its full-year adjusted earnings per share outlook to at least $9.50, up from a previous forecast of at least $9.00 per share.

Net income declined to $162 million, or $1.33 per share, from $195 million, or $1.62 per share, a year earlier. Revenue rose to $41.2 billion from nearly $32.6 billion in the comparable quarter, helped largely by the increase in Medicare Advantage enrollment.

“Humana is delivering positive results for our members, our patients and their health,” said President and CEO Jim Rechtin. “We are also increasingly driving financial and operating performance toward being ‘ahead’ of our plan.”

The company said it continues to expand Medicaid coverage for low-income Americans and grow its CenterWell business, which posted year-to-date growth of 146,800 patients, or 30%, in CenterWell Senior Primary Care.

Humana recently said it entered a new joint venture agreement with a BlackRock investment unit to help finance the ongoing expansion of its CenterWell primary care clinic network.

The nearly 150 clinics for older adults, generally covered by Medicare plans, will be backed financially by HPS Investment Partners, part of BlackRock, replacing Humana's existing partnership with Welsh, Carson, Anderson & Stowe (WCAS).