Humana’s fourth-quarter earnings fell 30 percent from a year earlier as the insurer continued to struggle with higher medical expenses related to customers it has gained through the Affordable Care Act.
The company reiterated that it “continues to evaluate its participation” on the health exchanges for 2017, meaning it hasn’t decided yet whether it wants to continue to offer its insurance plans through the ACA exchanges.
Humana said full-year adjusted earnings per share were in line with management expectations. The company expects profits to increase in 2016 thanks in part to more customers and improving margins in its individual Medicare Advantage line of business.
Fourth-quarter net earnings were $101 million, compared to $145 million a year earlier.
Revenues for the quarter, at nearly $13.4 billion, rose 8.4 percent, but operating expenses rose 9.3 percent, to nearly $13.1 billion.
Benefits expenses jumped 14 percent, to $11.1 billion. And medical claims from ACA-compliant plans exceeded premiums by a record $176 million, before taxes.
Humana said customers it has gained through the ACA, aka Obamacare, have been sicker than expected. The law allows people to sign up for health insurance only during certain periods to avoid people from signing up for insurance only after they get sick — but Humana said exemptions to the limited sign-up window are allowing people to circumvent the law’s intention and means insurers have to deal with sicker-than-average patients, which is “causing more volatility in claims experience.”
Some insurers, such as United Health Group, have reported similar struggles, but the CEO of Aetna, the Hartford, Conn.-based insurer that wants to buy Humana for $37 billion, has said he still sees the exchanges as a big opportunity.
Humana said full-year adjusted earnings per share, at $7.75, were in line with management expectations. The company said it expects adjusted EPS this year of $8.85.
Humana shares rose 2.8 percent in early morning trading.