Dive Brief:
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Humana announced its second-quarter earnings, which showed the payer’s operating earnings per share exceeded estimates by 13%. The company raised its adjusted outlook from $11.10 to $11.50.
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Humana said net profit increased to $1.04 billion ($4.46 a share) from $636 million ($2.06) compared to the second quarter of 2016. However, revenue declined from $14 billion to $13.5 billion.
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Humana said the company’s individual Medicare Advantage (MA) results “significantly” outperformed expectations.
Dive Insight:
Humana has enjoyed mostly positive earnings reports this year since the merger proposal with Aetna imploded in February. Humana benefited from a $1 billion contractual break-up fee that helped the first-quarter numbers, which included $1.1 billion net income. That was an increase from $254 million in the first quarter of 2016.
The second-quarter numbers were thanks in part to MA. Brian A. Kane, SVP and CFO, said the success of the MA business is because of Humana’s focus on the program, which resulted in “stable and competitive benefits.”
Humana is the second largest MA payer with 2.8 million MA members. Humana said earlier in April that it plans to focus on Medicare Part D and MA, as it sees potential growth in the aging baby boomer population. The payer is also pulling out of its remaining Affordable Care Act (ACA) markets next year.
The MA market was a major reason why Humana's attempted merger with Aetna earlier this year failed. A federal court judge rejected the plan because of concerns about competition in the MA market and ACA exchanges. Since then, both companies announced they were leaving the ACA exchanges in 2018.
While leaving the ACA markets, Humana is focusing more on MA. Humana recently announced that it plans to add 500 employees to handle MA applications during the open enrollment period, which starts on October 15.
Humana isn't the only payer focusing more on MA. UnitedHealth Group, which has the largest MA market share, and other payers have found success in MA. UnitedHealth expects that MA enrollment will grow from about one-third of Medicare beneficiaries to half eventually.