Humana raises MA enrollment projections again, beats EPS market estimates

Humana expects to add 35,000 more members to its Medicare Advantage (MA) plans and grow by 19% in 2023 to reach approximately 860,000 members, an increase of about 85,000 more members than projected during the first quarter, executives said Wednesday during a third-quarter earnings call.

The health payer giant recorded a third-quarter earnings per share of $6.71 on a GAAP basis and an adjusted earnings per share (EPS) of $7.78, beating market estimates of $7.15 per share, citing performance in its Medicaid and primary care businesses. The company’s adjusted EPS was $1.28 lower than the previous quarter.

Total profit for the third quarter was $832 million, down from $1.2 billion in the prioryear quarter. Through three quarters, Humana has earned $3 billion in profit, according to the report. 

Humana also recorded $26.4 billion in third-quarter revenue, a 15.9% year-over-year increase.

The favorable revenues are driven by individual MA and state-based contracts membership and higher per member MA premiums but offset by declines in membership for Humana’s other offerings, the company said in a statement.

“We are building upon our omnichannel strategy in 2023, where we have seen a 50% increase in our internal sales year-to-date, which is our highest lifetime value channel,” said CEO Bruce Broussard during the call. “… we're excited about the strong growth of our internal payer-agnostic channel, which is expected to double its sales production year over year this AEP.”

Similar to its second-quarter earnings results, Humana downplayed its higher utilization costs but noted it offset some of its gains.

“Like others in the Medicare Advantage space, Humana is experiencing higher medical utilization for this population,” said Forrester Principal Analyst Arielle Trzcinski in an email to Fierce Healthcare. “Humana noted multiple tactics to address this trend—in addition to leveraging its investments in primary care, Humana also noted it was deploying a proactive engagement strategy and adopting standardized risk stratification to help bend this curve.”

The market reacted negatively to the company’s outlook, disappointed the company revised its full-year EPS target on a GAAP basis from at least $26.91 to $26.31, while affirming its upper range of $28.35. The company’s stock price is down about 4% since the market opened. Humana maintains that its 2025 EPS target is $37.

Humana said its benefit expense ratio is 86.6%, partially due to a higher proportion of age-ins, which run a higher benefit expense ratio than new members. The company said this is reflected because of investments in benefit design for Humana’s MA products, continuation of elevated MA utilization trends and a higher-than-expected proportion of age-ins. The insurance segment benefit expense ratio was increased to 87.5%, implying a fourth-quarter ratio of 89.5%, said Chief Financial Officer Susan Diamond during the call.

“We anticipate that the higher 2023 insurance segment benefit ratio will be offset by additional administrative expense reduction, driven in part by the sustainable productivity initiatives, improved net investment income and other business outperformance,” she said.

Broussard, who will be stepping down in late 2024 and eventually replaced by Envision Healthcare CEO Jim Rechtin, hailed Humana as an industry leader for six straight years for enrolling members in four star or higher plans. Humana will have 5.5 million members, or 94% of its total members, in four star and above plans for 2024, with 61% of members in 4.5 star or higher plans.

Trzcinski added that Humana stressed employee experience throughout the call, given the current climate of high burnout and labor disputes among clinicians.

Broussard said CenterWell—a unit that includes the payer’s senior-focused primary care clinics, home health business and pharmacy benefit manager—locations have increased to 296 and 285,000 patients, equal to 33% year-over-year growth. Diamond said Humana continues to see an increase in COVID-19 admissions in the third quarter, noting that internal forecasts believed that would occur in the fourth quarter.

“To date, we have not seen an offset in non-COVID-19 utilization, which diverges from the consistent patterns seen previously,” she explained.