Humana announced a strong start in the first quarter of 2019 driven by better-than-expected growth in Medicare Advantage (MA). The company raised its full-year expected individual growth for MA to between 415,000 to 440,000 members, representing 14% growth in 2019.
For the fiscal quarter ending March 31, Humana’s earnings exceeded management's expectations, according to its latest financial data. However, the company is cautious, because during Medicare enrollment at the start of the year, new members increase revenues; they eventually have a breakeven impact on pretax earnings in the first year.
“Each day, more and more seniors are choosing Medicare Advantage, a program that today has over 22 million members, demonstrating the compelling value of a program that delivers affordable, quality care for seniors and improved clinical outcomes as payers and providers work together to understand each member’s whole health and help them navigate the complex healthcare system," Bruce Broussard, Humana’s president and CEO, said in a statement.
Broussard also noted in an earnings calls that MA drives improved health outcomes and lowers costs to the entire system, saving millions of dollars while helping seniors to achieve their best selves. Specifically he cited that through MA, Humana members have reported 7% less emergency department visits and 5% fewer hospital stays. In addition, there has been an 11% lift in colorectal screenings and 10% more breast cancer screening.
Humana initially projected an increase of between 375,000 and 400,000 MA members for 2019.
State-based contracts membership was 461,300 as of March 31, a net increase of 125,300 or 37%, from the same quarter in 2018 and up 120,200, or 35%, as of December 31, 2018. The increases primarily resulted from the statewide award of a comprehensive contract under the Managed Medical Assistance program in Florida.
However, Broussard warned that a Medicare for All program would not be beneficial for Americans.
"Humana does not support any bill that would get rid of MA or make private health insurance illegal," he said on the call. He believes that the way the system is set up now gives a wholistic view of the patient, while driving improvements and customer satisfaction. "The success is evident."
In other regulatory comments, "Humana supports PBM rebate legislative efforts and confirmed to analysts that the company stands ready to implement point of sale rebates, but will operate under current law until regulatory requirements mandate the shift to point of sale rebates," Jeff Becker, a senior analyst at Forrester told FierceHealthcare.
Overall, revenue for the quarter was around $16 million, up from about $14 million during the same quarter in 2018, a 13% increase.
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The retail segment looked strong and has allowed Humana to raise its full-year adjusted EPS guidance to a range of $17.25 to $17.50, an expected growth of between 19% and 20% and from $16.63 to $16.88 on a GAAP basis.
Looking at the healthcare services segment revenues on a GAAP basis, they were up from $5.7 million in the first quarter of 2018 to $6.1 million in the first quarter of 2019.
However, the first-quarter consolidated benefit ratio of 86.2% increased 170 basis points from the first-quarter 2018 GAAP consolidated benefit ratio of 84.5%, due in large part to some unfavorable factors including the suspension of the HIF in 2019 and the benefit ratio associated with higher-than-expected individual MA growth for 2019.