- An uptick in COVID-19 testing and treatment led Humana to report a loss for the fourth quarter of 2020 of $2.07 per share and a pre-tax loss of $458 million, a large swing from a pre-tax income of $593 million during the prior-year period. Analysts had expected an adjusted loss of $2.37 per share, but Humana slightly beat expectations with an adjusted loss of $2.30 per share.
- The payer said the increase in COVID-19 care experienced during the last two months of the quarter was coupled with a decline in non-COVID-19 utilization after largely returning to normal levels. The decline was about 15% below the normal baseline, executives said during Wednesday's call with investors.
- Still, Humana remained in the black for the full year of 2020. It posted pre-tax income of $4.6 billion for the full year, a 33% increase compared with 2019.
Throughout 2020, insurers largely benefited from the pandemic as many members put off care. However, the companies have warned that this trend will ultimately swing back as members return for the treatment they delayed.
Humana executives explained Wednesday how the absence of some patients last year, especially toward the end of the year, created unique challenges for 2021, particularly in Medicare business lines.
Medicare Advantage organizations get paid based on a beneficiary's expected cost. To calculate a member's cost, plans have to document their health conditions to establish their level of risk. Even though Humana aimed to see members throughout 2020 by using telehealth to document their conditions, the last two months of depressed utilization hampered the insurer's ability to do that.
"There's no doubt that 2021 has a heightened level of uncertainty," CFO Brian Kane said. He added that due to high COVID-19 claims and the different mix of utilization, particularly a reliance on telehealth, the payer can't place the same level of "reliance on historical trends as compared to a normal year."
Kane said Medicare risk adjustment revenue may be down by as much as $700 million to $1 billion in 2021, representing 1% to 1.5% of its Medicare premium for the full year.
Still, there are some tailwinds that could mitigate those projections.
Humana provided 2021 earnings guidance, saying it expects earnings per share to be between $20.82 and $21.32 and adjusted EPS to be between $21.25 and $21.75.
Humana's retail segment, which includes its Medicare and Medicaid business, reported enrollment growth for the full year in its individual and group MA plans. It also reported an uptick in its medical loss ratio, or what it calls a benefit expense ratio, for the fourth quarter compared with the prior-year period. Still, the retail segment's full-year benefit expense ratio of 84.2% was lower than 2019.
Commercial membership saw a 14% decrease in members year over year, due in part to the economic downturn spurred by the pandemic.