JPM23: Humana bounces back from poor MA enrollment showing in 2022, boosts guidance on membership growth

SAN FRANCISCO—Last year, Humana was forced to slash its estimates for Medicare Advantage enrollment growth, and the news dominated the payer industry conversation at the J.P. Morgan Healthcare Conference.

This year, the insurer revealed that a year of introspection and investment in its core business produced a turnaround that exceeded even its internal expectations. In a filing submitted Monday to the Securities and Exchange Commission, Humana said it gained about 500,000 members during the annual enrollment period for Medicare and was boosting its overall membership growth guidance to at least 625,000.

Previously, Humana said it expected to add 500,000 new members over the course of 2023. Adding 625,000 new lives would represent membership growth of 13.6% compared to 2022, according to the filing.

Chief Financial Officer Susan Diamond said at the conference that there were questions as to whether Humana could rebound within a year as it charted a course to address issues identified in the 2022 enrollment period.

"We were very pleased with the results," she said.

Humana initially projected that it would bring in between 325,000 and 350,000 new members for 2022, an estimate it cut down to between 150,000 and 200,000 new members on the heels of the annual enrollment period. In a session at JPM in 2022, CEO Bruce Broussard and Diamond both hinted at areas for improvement.

Broussard said much of the insurer's focus in sales and outreach centered around price—rather than articulating more directly what Medicare Advantage can offer that traditional Medicare cannot, namely more coordinated, value-based care—and that rethinking its approach to sales was going to be a key consideration moving forward.

As such, Humana later launched a $1 billion value creation initiative with the goal of investing further in its core Medicare Advantage business. The company also chose to restructure its enterprise, establishing two main pillars: insurance services and CenterWell.

The goal, executives said, was to streamline its leadership structure in a bid to simplify operations. Broussard also said on Humana's second-quarter earnings call that the new organizational structure would allow for greater collaboration between its core insurance business and CenterWell, which is a key growth target for the future.

Several policy topics are set to play a key role in shaping the Medicare Advantage program moving forward. The Centers for Medicare & Medicaid Services (CMS) in November postponed the finalization of a controversial rule on risk adjustment data validation (RADV) until Feb. 1. 

The rule was first proposed in 2018 and has faced significant pushback from insurers as it rethinks RADV audits, which are key in determining what the government pays Medicare Advantage plans. In the original version of the rule, CMS nixed the "fee-for-service adjuster" in the calculations, which adjust RADV audit recoveries to ensure actuarial parity between traditional Medicare and Medicare Advantage.

Insurers have lobbied loudly for CMS to rethink this change to the audit methodology. Diamond said she sees two outcomes for the response to the forthcoming final rule, based on whether the fee-for-service adjuster is revived.

Even if the fee-for-service adjuster is restored in the final rule, the insurance industry faces significant and complex calculations around RADV, Diamond said. However, that would address payers' largest concern with the risk adjustment changes.

However, should the agency reiterate its previous stance that the adjuster is not necessary, a lengthy legal battle is likely to ensue, she said. The public policy response would also likely be broadly negative, as it could impact pricing for 2024 plans.

In addition, Diamond said that Humana and other Medicare Advantage plans are bracing for rate increases in the program to slim, and have been for some time.

"We've benefited from some favorable rate notices," she said. "We don't anticipate that 4%-plus rate environment will continue long-term."