Humana beat earnings estimates for the third quarter of 2019 thanks in part to growth in its Medicare Advantage business, generating $16.2 billion in revenue.
The insurer, which released its third-quarter results Monday, said the earnings growth was fueled due to a massive boost in Medicare Advantage membership. As a result, Humana has increased its 2019 earnings per share guidance to $17.75 on an adjusted basis, representing 22% growth this year.
“We are seeing a number of positive outcomes as a result of our discipline and focus in these areas including improvements in quality as reflected in our strong Star scores and CMS program audit results, and the experience of our members, with increased net promoter scores,” said Humana President and CEO Bruce Broussard.
Humana is expected to increase its full-year individual Medicare Advantage membership by 530,000 members in 2019, a 17% bump. The company added that 92% of its Medicare Advantage members are enrolled in a 4-star or higher contract for 2020, including 1.3 million customers in a 4.5-star contract.
Humana’s $16.2 billion in revenue is a slight increase from $14 billion in the third quarter of 2018. Humana reported that it generated $8.8 billion in pre-tax income, a slight decline from $9 billion in the third quarter of 2018. Revenues for Humana's government business that includes Medicare Advantage and the Affordable Care Act was $14 billion in the third quarter, up from $12 billion in the 2018 third quarter.
However, the company's revenue for its commercial and specialty segment segment that includes employer group insurance and specialty insurance benefits was slightly down. The insurer earned $1.88 billion in the third quarter of 2019 compared to $1.89 billion in the third quarter of 2018.
Broussard told analysts during an investor call that the insurer's group business "is not something to be proud of." He added that the insurer is working to improve that in the short term.
Humana is also "always in discussions" on how to expand its partnership with Walmart, which has a tie-in for a cheap Medicare Part D plan, said Broussard. But Broussard said the retail giant, which has been making more overtures into healthcare, is very focused on commercial and associate healthcare as opposed to Humana's narrow focus on senior care.
"We are a little more narrow in our approach," he said.
Broussard told analysts during an investor call that a potential headwind for 2020 could be the resumption of the Affordable Care Act's health insurance tax, which has been delayed in 2019. While there is bipartisan support to either delay or repeal the tax, so far no moves have been made in Congress, and that has the industry worried.
"I think the industry is wrestling with how does it get through the legislative process," Broussard said. "All the confusion in Washington right now it is hard to predict how this will get going through."