Humana HQ

Humana is weighing whether to exit Affordable Care Act exchanges in some states as the insurer continues to struggle with sicker-than-expected patients.

The Louisville-based company said Wednesday that its first-quarter revenues were essentially unchanged from a year earlier, but net income, at $234 million, was cut nearly in half.

Humana’s shares tumbled more than 1 percent during the day but closed down 0.7 percent. The Dow and S&P 500 recorded losses of less than 0.6 percent.

The insurer said that adjusted pretax earnings in its group and health services segments rose by a combined $15 million — but fell by $221 million, or 59 percent, in the retail segment.

Humana said retail results worsened primarily because the segment’s benefit ratio increased. The ratio compares the company’s cost to provide health care with the money it receives for providing that care. A higher ratio indicates the span between costs and revenues is narrowing.

Humana said its overall benefit ratio in the first quarter was 84.8 percent, up 1.7 percentage points compared to the first quarter of 2015. The retail segment’s benefit ratio increased 1.9 percentage points, to 87.7 percent.

Humana_logoWhile a couple of percentage points may not seem like a big deal, they can be a big drag on earnings in large companies with millions of customers.

Humana blamed the benefit ratio increase in part on “the unfavorable seasonal impact of an extra business day from leap year.”

Humana’s first-quarter earnings were also dragged down by $34 million in expenditures related to the proposed acquisition by Aetna.

The company also said it continues to expect to lose money this year from customers it has gained through health exchanges from the Affordable Care Act, also known as Obamacare. Humana had set aside a $176 million “premium deficiency reserve” in the fourth quarter to cover expected losses related to the Obamacare customers. It added another $13 million to the PDR in the first quarter.

The company said today that it is still figuring out how and where it will participate in the Obamacare exchanges next year.

“Humana anticipates proposing a number of changes … (which) may include certain statewide market and product exits …” the company said.

Other insurers previously have said they are struggling with Obamacare patients because their health insurance premiums do not cover their health care costs.

Humana also said it had nearly 14.3 million medical customers in the first quarter, up 0.8 percent. The number of Medicare customers, at nearly 8 million, increased 6 percent, and the number of prescription drug plan customers, at 4.8 million, improved 10.3 percent. However, Humana’s 875,000 individual commercial customers, which includes the Obamacare patients, fell 21 percent.

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Boris Ladwig
Boris Ladwig is a reporter with more than 20 years of experience and has won awards from multiple journalism organizations in Indiana and Kentucky for feature series, news, First Amendment/community affairs, nondeadline news, criminal justice, business and investigative reporting. As part of The (Columbus, Indiana) Republic’s staff, he also won the Kent Cooper award, the top honor given by the Associated Press Managing Editors for the best overall news writing in the state. A graduate of Indiana State University, he is a soccer aficionado (Borussia Dortmund and 1. FC Köln), singer and travel enthusiast who has visited countries on five continents. He speaks fluent German, rudimentary French and bits of Spanish, Italian, Khmer and Mandarin.