Now making money on Obamacare, Humana still plans to quit exchanges

LOUISVILLE, Ky. (WDRB) – Growth in its core Medicare Advantage business will push Humana’s revenue to more than $60 billion this year, the Louisville-based company said Wednesday.

Louisville-based Humana said it will add 375,000 to 400,000 seniors to its Medicare business, in which the federal government pays the insurer fixed rates to provide health coverage to seniors. Humana’s Medicare Advantage enrollment will swell to about 3.5 million people in 2019.

Privately managed Medicare plans like Humana’s are already a growing market as Baby Boomers age into Medicare and a greater percentage of them opt for the private coverage, which typically offers enhanced benefits compared to original Medicare.

But Humana’s Medicare growth is “outpacing” the general trend in the industry, CEO Bruce Broussard told analysts on a conference call Wednesday.

He added that about 44 percent of the company’s new Medicare customers switched to Humana from other Medicare Advantage providers during the year-end 2018 enrollment period.

The projections came as Humana reported pre-tax profits and earnings per share for 2018 that were substantially lower than in 2017.

The company earned $2 billion in pre-tax profits in 2018, down from $4 billion in 2017.

However, 2017’s results were boosted by the $1 billion break-up fee that rival insurer Aetna paid Humana after their merger plan fell apart, while 2018’s results were dragged down by the company’s decision to get out of the long-term care insurance business, taking a $786 million loss on a sale of legacy policies.

When excluding one-time items like those – and considering the company spent $1.1 billion to buy its own shares in 2018 and reduce its share count – Humana’s “adjusted” earnings per share were up about 24 percent in 2018 compared to a year earlier.

Ana Gupte, an analyst with SVB Leerink, said in a note to clients that the “solid” growth in Humana’s Medicare business and other factors like the company’s decision increase its dividend by 10 percent “should be enough to continue the recent momentum observed” in Humana’s stock price.

Humana shares were down about 1 percent on Wednesday at $301. The market values the company at about $42 billion.

While its Medicare Advantage franchise hums along, Humana’s stand-alone Medicare prescription drug business continues to deteriorate.

Humana was once the leader in low-cost Medicare drug coverage through its co-branded Walmart plan, but competitors are now offering cheaper plans.

“We acknowledge that PDP plans have become a commodity,” Broussard said on Wednesday’s conference call.

Humana has about 4.5 million prescription drug plan members, down from 5.3 million at the end of 2017. But the company isn’t giving up on the business, Broussard said.

“While it will take time, we intend to stay competitive and are working on alternatives,” he said.

Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2019 WDRB News. All rights reserved.

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Chris Otts reports for WDRB.com about business and economic topics, higher education and local / state government. He joined WDRB News in 2013 after seven years with The Courier-Journal. Got a tip? Chris is at 502-585-0822 and cotts@wdrb.com.