LOUISVILLE, Ky. (WDRB) -- Executives at Louisville-based Humana Inc. are shrugging off changes that the federal government plans for Medicare Advantage, the program that has been Humana’s golden goose over the last two decades.
Next year the government will tweak how it pays private insurers like Humana that administer Medicare benefits to senior citizens. The result will mean an overall cut in payments, according to the health insurance industry, even as medical costs continue to rise.
Humana will likely "alter some benefits" in its 2024 Medicare plans in response, CEO Bruce Broussard told investors Wednesday. But the big picture remains unchanged: More seniors will continue to opt into Medicare Advantage every year because it saves them $2,400 on average over regular Medicare, he said.
"We just believe that (savings) is so compelling that people are not going to walk away from that, even though some of the benefits might be changed," Broussard said during Humana’s quarterly earnings call Wednesday.
Broussard’s comments came as the company reported revenue and profits that topped Wall Street estimates and slightly raised its projected performance for 2023.
The results "were unnewsworthy in a good way," Jeffries analysts wrote in a note to investor clients.
Back on track
Humana is the second-biggest insurer in Medicare Advantage, which is the fastest growing segment of health insurance because of the aging of the U.S. population.
While Humana also plays in Medicaid and covers U.S. military members, Medicare Advantage provides about 78% of its $93 billion in revenue in 2022. That share will only grow after Humana completes its recently announced exit from the employer insurance market.
Medicare Advantage covers about 30 million people, with nearly half of Medicare-eligible citizens choosing to get their benefits through a private company like Humana instead of directly from the government.
The program offers additional benefits like dental and vision coverage in exchange for restrictions that don’t apply to regular Medicare, such as only being able to see certain doctors or requirements for prior authorizations.
After a rare slowdown in 2022, Humana confirmed Wednesday that its Medicare business is back on track. The company covers 5.1 million individuals through the program, a 13% increase from a year earlier.
That tops rival United Healthcare, which reported 9.5% growth, and CVS’ Aetna unit, which has not yet released results but projects more tepid growth.
The Biden administration’s Centers for Medicare and Medicaid Services in February proposed changes in Medicare Advantage that drew sharp criticism from the insurance industry.
"These cuts will result in higher premiums and fewer benefits for seniors and people with disabilities," said America’s Health Insurance Plans, their trade group.
Not everyone agrees. Critics have long said the government pays too much to Medicare Advantage plans. Sen. Elizabeth Warren, D-Mass., said there is a "long history of corporate profiteering" in the program.
Nonetheless, the government softened the blow last month by phasing in the changes over three years.
Broussard said the result will be about 1% cut in payments industrywide in 2024. He didn’t say which benefits Humana would change, but, "We will alter them in a in a way that is very manageable on behalf of the beneficiary."
