- Humana warned it's preparing for significant headwinds come 2020 with the Affordable Care Act's health insurance tax moratorium set to expire as it reported second quarter results Wednesday.
- Executives said the company is using its performance in the quarter to invest in bids for 2020 to help minimize the impact on customers and to ensure products are competitive.
- "I think out of all the industry players, we, as a result of having high [per member, per month] revenue, the industry fee disproportionately affects us more versus others in the industry," Humana CEO Bruce Broussard said during the second quarter earnings call with investors.
The ACA's health insurance tax was one of many levies on industry to fund coverage expansion under the 2010 law.
It began at $8 billion in 2014 spread across insurers selling fully insured coverage, rose to $11.3 billion by 2016, had a moratorium in 2017 and kicked back in at $14.3 billion in 2018. The tax was suspended by Congress for 2019 and is set to come back in 2020 if there is no further congressional action.
Humana picked up 457,300 individual Medicare Advantage members, a 15% jump, and the largest membership growth it has seen in a decade, executives touted during Wednesday's call.
The Louisville, Kentucky-based insurer beat analysts' expectations on both earnings and revenue. The company reported net income of $940 million on revenue of $16.2 billion.
Almost all of Humana's retail segments reported strong membership growth. However, membership did decline 12% in its standalone Medicare Part D business. The company blamed the slump on competition in the marketplace and said its plans are no longer the "low cost plan in any market for 2019."
The company's medical cost ratio fell, unlike some if its competitors. Humana said its second quarter medical cost ratio slid to 85.2%, a drop from 85.5% during the second quarter of 2018. That was largely thanks to lower medical costs than the company had budgeted for the year and better engaging members in clinical programs to manage their health.
Humana raised its earnings guidance for the year and its expected membership growth.
The strategic investments afforded by this quarter "suggests HUM can better manage through the 2020 HIF [tax] headwinds," David Windley, an analyst with Jefferies, said in a recent note.