Humana cuts 2021 outlook after higher COVID-19 expenses but still plans robust Medicare Advantage growth for 2022

Humana building
Humana cut its 2021 financial outlook to reflect higher than anticipated costs for COVID-19. (Humana)

Humana expects its individual Medicare Advantage membership to grow by 8% in 2022 as part of a more conservative financial outlook. 

The insurer gave hints to its outlook for next year as part of its earnings report released Wednesday that saw Humana post a $1.5 billion profit in the third quarter but cut its financial outlook for 2021 due in part to higher-than-expected COVID-19 costs.

The insurer’s third-quarter earnings report, though, released Wednesday, pointed to strong growth in its Medicare Advantage offerings and lower-than-expected healthcare use among MA beneficiaries.

Humana’s MA individual membership is expected to grow 11% compared to the previous year.

“Given a highly competitive market, this type of growth is difficult, but we believe our success speaks to the value that our MA plans deliver to Medicare beneficiaries,” said Humana CEO Bruce Broussard in a statement.

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Humana also generated $20.7 billion in revenue for the third quarter, which fell short of Wall Street expectations.

Humana is expecting another round of robust growth in MA in 2022, expecting membership growth in the range of 325,000 to 375,000, about 8% compared to this year. 

However, Humana is also expecting a net decline of 1 million members in its Medicare prescription drug plan next year and for group MA enrollment to be flat. 

"We believe we struck the right balance ad are competitively positioned for continued growth in MA," Broussard said during an investor call on Wednesday.

Broussard attributed Humana's growth in MA to high satisfaction scores, noting that 97% of beneficiaries are in a plan with four or more star ratings. 

While the Centers for Medicare & Medicaid Services did make adjustments to the star ratings this year due to impacts from the pandemic, Broussard said the changes did not have any material impact on the insurer's ratings.

Humana also closed the acquisition of its Kindred at Home back in August and is migrating the home health company into the insurer's payer agnostic primary care brand CenterWell.

Broussard also gave a nod to the massive labor shortage that has been affecting the healthcare industry, especially providers. 

"In some markets, nursing shortages result in inadequate capacity to meet demand, negatively impcctnig our ability to growth top line," he said. "We believe Humana's brand will bolster recruiting and retention levels for nurses."

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Despite these results, Humana cut its full-year outlook based on a surge of COVID-19 cases in the quarter linked to the delta variant. Back in July, Humana predicted that non-COVID MA healthcare use will run 2.5% below baseline in the second half of the year, and the insurer assumed there would be minimal COVID-19 treatment and testing costs.

But while hospitalization levels were on par with what Humana expected, MA use was lower than previously anticipated.

Humana, though, is taking a more “conservative posture going into the final months of 2021,” its release said. The insurer now believes MA utilization will run about 1% below its baseline.