Humana Wednesday reported $1.2 billion in first quarter profits as the company gets better control of medical cost trends in its Medicare Advantage plans.
Medicare Advantage plans, which are a big share of Humana’s business, contract with the federal government to provide extra benefits and services to seniors, such as disease management and nurse help hotlines with some also offering vision, dental care and wellness programs.
But Humana and rival operators of Medicare Advantage plans have been hit hard in the last year with higher costs. In Humana’s case, the company has exited certain “unprofitable” plans and counties.
“Our first quarter insurance segment benefit ratio of 87.4% reflects medical cost trends that developed in line with our expectations, while our first quarter Adjusted EPS was ahead of expectations,” Humana said in prepared management remarks released along with the company’s first quarter earnings report.
The benefit expense ratio, which is the percentage of premium revenue that goes toward medical costs, was 87.4% compared to 89.3% in the first quarter of last year. That helped Humana’s net income rise to $1.24 billion, or $10.30 per share, compared to $741 million, or $6.11, in the year-ago quarter.
“We remain committed to achieving individual Medicare Advantage (MA) pretax margin of ‘at least 3%’ over time and remain confident in our expectation that our 2025 MA pricing will drive the intended underlying margin improvement,” Humana management said in its prepared remarks. “We continue to anticipate a ‘few hundred million dollars’ of incremental investments in 2025 to improve member and patient outcomes and support operational excellence, positioning the company for long-term success.”
Humana’s total revenues rose in the first quarter to $32.1 billion compared to $29.6 billion thanks in part to “higher per member Medicare and state-based contracts premiums” as well as the company’s growth in the company’s CenterWell healthcare services business.
“Our team has done a great job launching us on a strong start to the year,” Humana president and chief executive officer Jim Rechtin said in a statement accompanying the earnings report. “Medicare Advantage is performing as expected and we are excited about our progress in expanding CenterWell and Medicaid. We are confident in the growth outlook for value-based care and Medicare Advantage, which will allow us to provide more quality care to a broader group of patients and members.”
