Humana reported $1.1 billion net income for the first quarter of 2017 on Wednesday, which is a huge jump from $254 million in the first quarter of last year. Humana officials pointed to the failed merger with Aetna as a major reason for the net income increase.
Bruce D. Broussard, Humana’s president and chief executive officer, said the first-quarter results show the company’s strength, especially in Medicare Advantage.
- Humana’s Q1 results come a few days after Aetna posted a $381 million loss and largely attributed it to the failed $37 billion merger.
Both Aetna and Humana pointed to the failed merger in their latest earnings reports for their financial success or losses. It’s clear to see who has benefited from the failed deal so far.
A court decision in favor of the Department of Justice blocked the Aetna-Humana deal earlier this month partly due to concerns with competition in the Medicare Advantage (MA) market. The Louisville-based payer received a $947 million pre-tax payment as part of the failed merger, which includes the contractual breakup fee of $1 billion Aetna had agreed to pay Humana.
The two other health insurance giants that proposed to merge around the same time as Aetna and Humana – Anthem and Cigna – did not end their deal after it was blocked in court on antitrust grounds. The Anthem-Cigna breakup fee is $1.85 billion, though Cigna is also seeking more than $13 billion in damages with a lawsuit it filed against Anthem shortly after the court blocking.
Humana’s positive Q1 comes after it posted a $401 million loss in the Q4 2016. The company at that time blamed the $483 million write-off related to the Affordable Care Act (ACA) risk corridor payments as the reason for the loss in that quarter. For all of 2016, Humana said it had a $614 million profit – down from $1.3 billion in 2015.
On Wednesday, Humana said that it continues to find success with its 2.8 million MA members. This is consistent with Broussard's statements at Humana's annual shareholders' meeting last month. At that time, he said the company planned to focus on Medicare Part D and MA patients. The company sees potential growth in the aging baby boomer population.
While Humana sees opportunities in Medicare, it feels the opposite about the ACA exchanges. Of Humana's total 14 million members, the insurer has less than 200,000 members in the individual market. Humana cut its individual members down to 11 states this year and plans to stop offering all ACA exchanges plans in 2018.