- Humana cut its earnings expectations for the full year due to its own projections that utilization will be higher than originally anticipated for the remainder of 2021, following the surge of delta hospitalizations in the third quarter.
- Humana recorded large membership gains in both Medicare Advantage and its state-based contracts, which includes its Medicaid business.
- Humana beat Wall Street expectations on earnings and its benefit expenses ratio, though analysts with SVB Leerink expect the stock to drop as a result of the shift in expectations for the final quarter of the year.
The delta variant led to near-record COVID-19 hospitalizations among its members, on par with figures from the height of the pandemic in January 2021, executives said on Wednesday's call with investors.
Hospitalizations in the third quarter were "overwhelmingly" driven by the 20% of unvaccinated Medicare Advantage members, CFO Susan Diamond said.
Still, the dip in non-COVID-19 utilization outweighed the increase in COVID-19 utilization.
However, as a result of the trends experienced in the third quarter, Humana said it now expects Medicare Advantage utilization to run just 1% below pre-pandemic levels. It previously expected patient volumes to be 2.5% below the baseline.
"Estimating the impact of COVID has proven to be more challenging, particularly given the environment that we were in in 2020 is quite different than what we're experiencing, obviously, in 2021," Diamond said.
Humana has studied surge patterns throughout the pandemic, witnessing a consistent depression in non-COVID admissions amid surges, creating an offset in COVID's overall impact, a benefit to the insurer.
But it's on the "non-inpatient side where we tend to see more variation," Diamond said, which makes it harder to forecast.
Humana generated revenue of nearly $21 billion for the third quarter, up slightly from the prior-year period with net income of $1.5 billion also up from the prior-year period.
In other news, Humana completed its acquisition of Kindred in the third quarter, an important part of its long-term strategy.
Starting with a rollout in the second quarter of next year, Humana wants to cover 50% of its MA members in a value-based home health model within the next five years.
Currently, Humana covers 270,000 members in this type of model in south Florida and southeast Texas, CEO Bruce Broussard said on Wednesday's call.
Humana ended the quarter with more than 17 million members.