Health Plan Weekly
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Boosted by Low Utilization, Humana Posts Robust Earnings for Second Quarter of 2022
Humana Inc. delivered robust financial results in the second quarter of 2020, with earnings far outstripping the Wall Street consensus. The Medicare Advantage-focused insurer credited lower-than-expected utilization for the strong result, provided investors with more detail about its plans to reorganize following several notable provider transactions, and touted plans to expand its Medicaid business.
Humana took in more than $23.7 billion in adjusted earnings in the second quarter, generating $959 million in adjusted cash flow and adjusted earnings per share of $8.67, beating the Street’s estimate by about $1.00 per share. The firm’s medical loss ratio (MLR) for the quarter was 85.8%. Executives raised the company’s end-of-year earnings projection by $0.25, a move that Oppenheimer & Co. analyst Michael Wiederhorn said “reflect[s] some conservatism” in a July 27 note to investors.
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What Happens if ARPA Subsidies Expire?
Approximately 3 million people currently enrolled in the individual marketplace could lose coverage, and more would see premiums double if the Congress fails to extend the American Rescue Plan Act’s subsidies, which are set to expire at the end of this year.
ARPA lowers the share of income enrollees need to contribute toward premiums for households making between 100% and 400% of the federal poverty level, and it temporarily caps enrollees with income above 400% of the FPL from paying more than 8.5% of their income for a silver plan premium. If the subsidies expire, 8.9 million people would be allowed to remain in the marketplace but experience premium subsidy loss. An additional 1.5 million may lose subsidies entirely but choose to remain insured, according to an HHS projection.
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News Briefs: System-level Deals Dominate Hospital M&A
Recent hospital transactions have mainly involved large hospital systems combining with other big providers, according to a report by Kaufman Hall. During the second quarter of this year, the smaller party of hospital mergers that took place in the quarter had revenues of $1.47 billion on average — more than double the average value of the smaller partner in transactions between 2016 and 2021. Overall, hospital deal volume has slowed, with only 13 transactions announced in the second quarter of 2022 compared to a recent high of 31 transactions in the second quarter of 2017. “We’re seeing that what used to be a hospital M&A game is become a bit more of a system M&A game,” Kaufman Hall managing director Anu Singh told AIS Health earlier this year.
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Medical Trend, Increases in Utilization Will Drive Up 2023 Marketplace Premiums
Premiums on the individual marketplace are set to increase by an average of 10% nationally, according to an analysis by the Kaiser Family Foundation (KFF) of the first batch of preliminary premium rate filings sent to state exchange regulators. The filings are just the first in several steps before carriers lock in rates for open enrollment for the 2023 plan year, and don’t represent the final price of those premiums. But experts tell AIS Health, a division of MMIT, that utilization and medical trend mean that substantive price increases are a certainty — even if Congress extends the American Rescue Plan Act’s (ARPA) enhanced premium tax credits, which are set to expire at the end of this year.
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UnitedHealth Plans on Eliminating Out-Of-Pocket Costs for Some Drugs, Raises Financial Guidance
Starting as early as next year, UnitedHealth Group expects to have no co-pays or out-of-pocket costs for members in its UnitedHealthcare division’s standard fully insured group plans who take several medications, including insulins. The managed care organization made the announcement on July 15, coinciding with the release of the company’s second quarter financial results that beat Wall Street analyst expectations.
UnitedHealth increased its adjusted net earnings per share (EPS) guidance for the year to $21.40 to $21.90, up from its previous guidance of $21.20 to $21.70 issued during its first quarter earnings call in April.
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