Humana expects more than 700,000 will drop out of Part D plans as market competition heats up 

Humana building
Humana is touting its MA business as a key driver of momentum heading into fiscal year 2019. (Humana)

Humana is expected to bleed a significant number of members from its Part D plans, as greater competition has chipped away at the company’s market share. 

Brian Kane, Humana’s chief financial officer, said on the company’s earnings call Wednesday morning that the insurer expects to lose between 700,000 and 750,000 members in its standalone Medicare prescription drug plans in 2019. That is a decrease in projections from November, when Humana estimated that as many as 800,000 people could drop from its Part D rolls. 

As more competitors have entered the Part D market, Humana’s plans are no longer consistently the lowest cost, which is leading some members to switch to other insurers, Kane said. Humana is now working to “innovate” the value proposition in their plans. 

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“While it will take time, we intend to stay competitive,” CEO Bruce Broussard said. 

RELATED: Cleveland Clinic Florida, WellStar Health System among first to join Humana’s value-based care program 

Though Humana expects a downturn in enrollment in its Part D plans, it is still projecting about 4.5 million enrollees in those plans, according to its earnings documents. 

Policy changes in Part D add another wrinkle to this discussion, Kane said, but Humana is rethinking its approach in that market irrespective of how proposals play out. 

That said, should the Department of Health and Human Services finalize its plan to end drug rebate protections in Part D for the 2020 plan year, that change would be “material” and would have significant implications for how these plans function, he said. 

The biggest risk, he said, is a potential adverse selection in pricing if the approach to negotiation is fundamentally changed. In addition, Humana is also concerned that the policy change is likely to drive up premiums in Part D plans. 

“There’s a whole host of complexity that has to be worked through,” Kane said. “It will have a meaningful impact, the timing of which is still uncertain.” 

RELATED: Humana reports $901M in Q3 earnings, attributing growth to prevention 

Broussard said that policy changes like this may be indicative that the Part D market, in its current form, “has run its course,” and it is time for a broad change in how it functions. 

However, he noted that the drug rebate proposal isn’t necessarily taking money out of the system or bringing down revenue for plan sponsors or drug companies, it’s just moving money that is already in Part D around. 

He said Humana will offer further perspective on the Part D rebate proposal in a formal commentary. 

Medicare Advantage a bright spot

Though Humana reported a downturn for enrollment in its Part D plans, its Medicare Advantage business was a bright light in 2018 and is a key source of the company’s momentum heading into the 2019 fiscal year. 

RELATED: Insurers point to Medicare Advantage as they boast about growth 

Humana reported a 6% increase in revenue for 2018, reaching $56.91 billion compared to $53.77 billion in 2017. Fourth quarter revenues were also on the rise, totalling $14.07 billion, a 7% uptick from $13.10 billion in Q4 2017.

As the health insurance fee was pushed off to 2020, Humana was able to invest significantly in improved service for its MA plans, Broussard said. The Centers for Medicare & Medicaid Services set strong rates for MA in the 2019 plan year, as well, he said, so that growth is expected to continue this year.

Humana expects to add 370,000 to 400,000 seniors to its MA plans in 2019, increasing its membership by 12% to 13%. Kane said the company also expects to add about 30,000 people to its group Medicare Advantage plans. 

“We are pleased with the consistency of ongoing improvement in our performance,” Broussard said.

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