Humana's 2025 earnings, pricing decisions and membership may take hit from MA rate notice
"We expect benefit levels, planned stability and choice for seniors to be negatively impacted by the final MA rate notice," says CEO Bruce Broussard.
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Humana, one of the biggest players in the Medicare Advantage market, raised its 2024 individual Medicare Advantage annual membership growth by 50,000 to now anticipate annual growth of approximately 150,000, or 2.8%, the company said this week during its Q1 earnings report.
However, Humana expects membership may take a hit from future Medicare Advantage pricing resulting from the Centers for Medicare and Medicaid Services payment rate notice released earlier this month.
Because of the lower-than-expected payment and benchmark rates, Humana is actively evaluating plan level pricing decisions and the expected impact to membership, president and COO James Rechtin said on the call.
The company's 2025 adjusted earnings per share growth outlook will be impacted by the finalization of MA bid pricing decisions, the continued evolution of the industry cost trends and the level of competitor pricing actions in 2025, which will impact net membership growth, said CEO Bruce Broussard,
"Specific to 2025, we expect benefit levels, planned stability and choice for seniors to be negatively impacted by the final MA rate notice, which is not sufficient to address their current medical cost trend environment and regulatory changes," Broussard said.
"As we look ahead, we acknowledge that the industry is experiencing a dynamic and challenging time we must navigate. And while the current environment will create disruption for the industry in the near term, we continue to believe in the strong core fundamentals and growth outlook of the MA industry and our ability to effectively compete in MA market remains intact," Broussard said. "Importantly, we believe that the industry will adjust to the current funding regulatory over time, continuing to deliver strong top line growth and normalizing at an appropriate margin of at least 3%. In that context, we remain committed to margin recovery and profitable growth through a multiyear pricing actions, creating value for our shareholders over the long term."
FINANCIALS
The company's net profits for the quarter were lower than Q1 2023, but still beat Wall Street expectations.
Net profits of $7.23 per share for the quarter were below the $9.38 per share reported in Q1 in 2023.
Humana's first quarter 2024 net profit was $741 million, which is a 40% decrease from the first quarter of 2023, according to The Wall Street Journal. Humana shares dipped roughly 4% in early trading, WSJ said.
Humana warned of higher-than-expected medical costs impacting its results into 2024 and beyond, the report said.
Email the writer: SMorse@himss.org
