UPDATED at 1 p.m. ET on April 24
Humana pulled back its growth projections for 2025 amid concerns about Medicare Advantage rates and demographic changes.
The company's stock dropped out of the gate and was down by 4.5% as of 1:15 p.m. ET. Humana had originally estimated between $6 and $10 in earnings per share for 2025. Humana did confirm its conservative guidance for the year, and expects about $16 in earnings per share for 2024.
Earlier this month, the Centers for Medicare & Medicaid Services finalized a 0.16% decrease in the benchmark rate in Medicare Advantage despite significant pushback from the insurance industry. Chief Operating Officer Jim Rechtin warned on Humana's earnings call Thursday that the changes would likely require that the company cut back on benefits and geographic reach.
Executives did not provide specifics, as Medicare Advantage bids for 2025 are nascent, but Rechtin said to expect more details later in the year.
"The outlook for Humana specifically and for the MA industry more broadly remains strong," he said. "The industry is navigating a challenging time, but it's important to recall that this is not the first time we've had to navigate challenging times."
"Humana has navigated those periods successful, adjusting as needed and continuing to grow," he said.
Humana posted $741 million in profit for the first quarter, surpassing Wall Street analysts' predictions.
The company also reported $29.6 billion in revenue for the first quarter, which beat the Street as well, according to Zacks Investment Research. By comparison, Humana brought in $1.2 billion in profit and $25 billion in revenue in the prior year quarter.
On the back of the performance, the company reaffirmed its earnings guidance and expects to bring in about $16 per share for the year. It is also anticipating a benefits ratio of 90% amid a spike in utilization in the Medicare Advantage (MA) program that dragged its finances in the fourth quarter.
The company took a conservative positioning for the year given the uncertainty around those trends. In prepared remarks, its leadership team—CEO Bruce Broussard, Chief Financial Officer Susan Diamond and Chief Operating Officer Jim Rechtin—said that the company also baked in impacts from the Change Healthcare cyberattack into its reaffirmed outlook, as there were positive signs around utilization in the first quarter.
"While we have seen some positive early medical cost indicators in both prior year development and current year utilization, we recognize the Change Healthcare disruption is impacting claim submissions and therefore took a more conservative approach to quarter end reserving resulting in a benefit expense ratio consistent with expectations," they said.
Humana reported $28.7 billion in revenue at its insurance segment, which it said was backed by higher per member premiums in Medicare as well as individual and group enrollment growth in MA. That was partially offset by ongoing declines in the company's commercial and standalone prescription drug plans as well as impacts from Medicaid redeterminations.
In the earnings release, the company did increase its projections around MA membership growth for the year by about 50,000 people and now expects growth of about 150,000 members or 2.8%.
Humana boasted 16.8 million medical members at the end of the first quarter.
Revenues at CenterWell were $4.8 billion in the first quarter, and Humana said it saw a boost from the performance of its home care business.