Humana raises earnings outlook, reports Medicare Advantage star-rating turnaround

Humana building
In addition to a strong focus on Medicare Advantage, Humana is actively expanding its primary care and home care platforms.

Humana reported better-than-expected quarterly earnings on Wednesday and bounced back in a big way from its Medicare Advantage star ratings downgrade.

The insurer announced that approximately 74% of its MA members are expected to be in plans rated four stars or higher in 2018—a major upgrade compared to last fall, when it disclosed that just 37% of customers would be in highly rated plans in 2017. Before that downgrade, 78% of Humana’s MA members were in plans rated four stars or higher.

“We are pleased that our individual Medicare Advantage business is significantly outperforming our previous expectations, reflecting our focus on operational excellence and the solid execution of our strategy,” Chief Financial Officer and Senior Vice President Brian A. Kane said in a release.

Part of what helped drive the star-ratings turnaround, Kane added during the company’s quarterly call with investors, were improvements it made in clinical quality.

“In particular, these ratings reflect our strong clinical HEDIS measures, which are at record high levels,” he said.

Overall in the quarter, Humana reported diluted earnings per share of $4.46, up from $2.06 in the second quarter of 2016. Its adjusted earnings per share of $3.49 beat consensus estimates of $3.08.

Given these results, the company raised its full-year earnings guidance from $16.91 per share to $17.83. On an adjusted basis, it raised its EPS outlook from $11.10 to $11.50.

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The insurer’s quarterly financial results “demonstrate the strength of our focused strategy,” which is centered on improving the health of seniors with chronic conditions via a coordinated, integrated delivery model, Humana CEO Bruce Broussard said during Wednesday’s call.

Humana had announced earlier this year that it would pull out of the Affordable Care Act exchanges entirely next year, citing a deteriorating risk pool. 

Broussard also noted that Humana is actively expanding its primary care and home care platforms—some of which can be accomplished through organic growth, but may also require mergers and acquisitions.

Humana’s executives appear relieved, however, to be done with the years-long saga of Aetna’s unsuccessful attempt to acquire it.

“Throughout the lengthy deal period, our associates never wavered in their focus and commitment to our members, provider partners and shareholders,” Broussard said in the earnings release. “It’s because of this that we continue to make strides in advancing our strategy while delivering strong operating performance.”