Humana outlines its strategy to bounce back after MA growth for 2022 underwhelms

While Humana's growth in Medicare Advantage fell short of expectations for this year, the insurer is taking lessons learned from the most recent annual enrollment period to right the ship, executives said Wednesday.

CEO Bruce Broussard said on the company's earnings call Wednesday that Humana is putting a particular focus in updating its marketing strategies to lure in new members as well as improve member retention. He previously flagged outreach as a key factor in the underwhelming growth numbers.

In early January, Humana submitted a filing with the Securities and Exchange Commission that cut the outlook for membership growth from between 325,000 and 375,000 new members to between 150,000 and 200,000 new members. The insurer said it added 130,000 members during open enrollment.

For one, Humana is planning to enhance training for people working in third-party call centers, he said, to ensure the experience is more in line with its in-house agents. Broussard said that the insurer saw churn rates that were three times higher in these third-party centers.

In addition, Humana will invest in both its internal telephonic call centers and digital capabilities for an improved member experience and to grow the number of people its teams can reach.

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Despite the enrollment setback, Broussard said Humana is well positioned to rebound and its brand is still a strong asset.

"Humana offers superior quality to its members as a strong brand and a long history of expertise in caring for people as they age," Broussard said.

Broussard also said that the insurer's newly announced value creation initiative aims to generate the room to invest further in Humana's Medicare Advantage products. He said a review of the company's ongoing strategic initiatives is already underway.

He said Humana will consider pausing or slowing investments in certain areas as part of this effort.

Humana posted a $14 million loss in the fourth quarter of 2021, according to the insurer's earnings report released Wednesday morning.

The results did beat Wall Street analysts' expectations, according to Zacks Investment Research. In the fourth quarter of 2020, Humana reported a $274 million loss. It also reported revenues of $21.1 billion for the quarter, which fell short of analyst projections. However, it does account for a 10.5% increase year over year, from $19 billion in revenue for the fourth quarter of 2020.

Humana said factors impacting its earnings for the quarter include the closure of its acquisition of the remaining shares in Kindred at Home as well as ongoing headwinds related to COVID-19.

Humana brought in $2.9 billion in profit for full-year 2021, down $434 million or 12.9% from its full-year 2020 haul, according to the report. Full-year revenues hit $83.1 billion, up 7.7% from $77.2 billion in 2020.

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Humana has been under Wall Street's microscope of late after it slashed its outlook for new Medicare Advantage enrollment. Its stock tumbled, and questions about the market have been posed to competitors at the J.P. Morgan Healthcare Conference as well as on earnings calls so far.

"Looking ahead, we are confident in both the fundamentals of the Medicare Advantage industry and the long-term growth prospects for our company," Broussard said in a statement. "We expect that improved membership growth, further penetration in our growing and maturing Healthcare Services businesses, and our increased focus on productivity improvements will position us to deliver on our long-term earnings target in 2023 and beyond."

For 2022, Humana expects at least $24 in earnings per share, according to the report, and has built in $1 of negative headwind related to the pandemic for the second year in a row. The insurer said that if this headwind does not materialize, it will be "conservative regarding the timing and pace with which it adjusts its FY 2022 earnings guidance."

The company is also aiming to generate $1 billion of additional value across its enterprise by 2023 and is planning several initiatives under that umbrella, including a critical review of strategic initiatives and rationalizing its real estate portfolio to reduce third-party spend.