Humana posted a $401 million loss in the fourth quarter of 2016, which was largely due to a previously announced $483 million write-off related to ACA risk corridor payments, according to an earnings report published Wednesday.
Despite the write-off and declines in membership, Aetna posted a $614 million profit for the full year, which was down from $1.3 billion in 2015.
- Humana held off on issuing earnings guidance for 2017 as it considers how to proceed in the wake of a court ruling that prevented a merger with Aetna, but that should occur by February 16.
Humana has been dealt several blows recently. Most recently, a judge ruled that the proposed merger between Aetna and Humana would violate anti-trust laws. In September, CMS reduced star quality ratings for many of its plans, which prompted a drop in stock prices. Later, CMS announced it would not pay many of the funds due to payers through the ACA risk corridor program, which prompted a massive write-off.
The earnings report from Humana highlights issues that extend beyond just a single payer. Several of the nation’s largest payers were affected by CMS star ratings for 2018. In November, CMS announced that it would only pay out 2% of almost $6 billion owed to payers through the risk corridor program in 2016. It was the second straight year that the risk corridor program failed to deliver, which has led multiple payers to sue the federal government.
The recent ruling breaking up a proposed merger between Humana and Aetna could have far-reaching effects. If the upcoming ruling in an anti-trust case over the merger between Anthem and Cigna prevents that union, it could mean the end of mega mergers between large payers.
Many payers “have a lot of cash on hand and they are looking for something to do with it that will boost their stock price,” Martin Gaynor, a professor at Carnegie Mellon University Heinz College, told Healthcare Dive in a recent interview. “Many perceive mergers and acquisitions as a way to do that.”
The deadline to file an appeal in the Aetna-Humana case has been set for February 15. It seems unlikely the payers would win an appeal, but they could pursue mergers with smaller companies as a way to increase market presence and boost stock prices. Forthcoming earnings guidance from Humana could reveal more about payer strategy following rulings in the high-profile anti-trust cases.