Humana bucks industry gloom as insurer keeps handle on medical costs
Its shares rose 6% in early trading as the company also highlighted better-than-expected membership in its individual Medicare Advantage plans, as well as strong performance in its CenterWell care-delivery unit.
Under Medicare Advantage plans, the U.S. government pays private insurers a set rate to manage healthcare for people aged 65 and older, and those with disabilities. CenterWell offers clinical programming for seniors, including primary care services and in-home health visits.
Humana has been "transparent" in discussing utilization, transparency and the impact of government payment changes, said George Renaudin, president of insurance.
"We reduced more benefits, and more significantly than all of our competitors in 2025."
Humana reported a quarterly medical cost ratio - the percentage of premiums spent on medical care - of 89.7%, up from 88.9% a year earlier, but in line with analysts' estimates.
Larger competitor UnitedHealth (UNH.N), opens new tab flagged underestimation of medical costs on Tuesday, and also provided a full-year profit forecast that fell short of analysts' already diminished estimates.
The industry has been battling stubbornly high costs for the last two years due to increased use of healthcare services across government-backed plans.
Humana projected full-year profit to be about $17 per share, compared with its previous estimate of about $16.25 and analyst estimates of $16.38 per share, as per LSEG data.
"We think this increase will be received positively, as the company's 2025 repricing actions appear to be having their intended effect," said J.P. Morgan analyst Lisa Gill.
Humana CEO Jim Rechtin said the company was confident in the growth outlook for Medicare Advantage and value-based care.
Under a value-based care model, providers are paid based on how well they keep patients healthy, such as preventing hospital readmissions, which larger rival UnitedHealth has said it has struggled to integrate.
UnitedHealth has been treating new value-based patients at a lower reimbursement rate than they deem as fair, said Morningstar analyst Julie Utterback.
Humana said it remained optimistic that its pricing of the Medicare Advantage plans for 2025 will drive margin improvement. It also expects membership decline in the plans to be lower than previously anticipated.
The company earned a second-quarter profit of $6.27 per share, topping estimates of $5.92.
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