Humana shares jumped on Wednesday after the insurer said that its Obamacare business performed better than expected in the second quarter. The company also said that it expected higher profits for this year than previously forecast, because of its strong Medicare business.
In addition, Humana said that federal regulators had raised the quality rating of its Medicare plans for 2018, which means more customers next year would be on the company’s most profitable plans.
Shares traded at $241.78 shortly after noon, up 4.8 percent. The S.&P. 500 was down slightly.
“Humana’s strong results and increase in full-year guidance demonstrate the strength of our integrated care delivery strategy,” President and CEO Bruce D. Broussard said in a filing with the Securities and Exchange Commission.
The Louisville-based insurer said that it earned a second-quarter per-share profit of $4.46, more than double what it earned a year earlier. The individual commercial business, primarily consisting of Affordable Care Act customers, added a profit of 51 cents per share. A year earlier, that business had lost 99 cents per share.
Humana has said that the health care costs of customers it has gained through ACA, informally known as Obamacare, have far outstripped the insurance premiums those customers have paid. The heavy losses prompted the company to announce in February that it would exit Obamacare next year.
Second-quarter revenue, at $13.5 billion, was down 3.4 percent, partially because Humana collected less in insurance premiums because of the planned ACA exit. The ACA business generated second-quarter revenue of $248 million, about a quarter of what it provided a year earlier.
Humana expects to earn $17.83 per share for the full year, up 5.4 percent from its previous projection. The insurer said its Medicare Advantage business is performing better than anticipated, in part because of higher-than-expected revenue per Medicare customer, who also have needed less health care than projected.
In addition, Humana said that it expected nearly three quarters of its Medicare customers next year to be on plans that the government gives at least four out of five stars. The stars are a quality rating that regulators use to determine how much they reimburses insurers. The Centers for Medicare & Medicaid Services previously had said that only 37 percent of Humana’s Medicare customers are in plans that get at least four stars.