Humana reports $591M Q4 loss, due to ‘unprecedented’ medical cost increases
After UnitedHealth recently reported 4th-quarter losses due to soaring Medicare Advantage medical costs, Humana has similarly reported steep losses, compared with a $71 million loss during the same period the previous year.
Humana is the latest large insurer to report steep losses in the fourth quarter of 2023. Its $591 million loss for the quarter, compared with $71 million during the same period the previous year, was worse than expected, and the company also has lowered revenue expectations for this year and beyond.
Humana said medical cost increases, which it called unprecedented, reflected larger dynamics across the Medicare business, and the trend likely will persist for years. The news comes on the heels of a similar report from UnitedHealth, whose medical costs, its largest expense, jumped to $62.23 billion in the quarter, up from $53.6 billion at the end of 2022.
Humana pointed to higher inpatient hospital stays in November and December and also cited increased use of physician services, outpatient surgeries and supplemental benefits.
“The Medicare Advantage sector is navigating significant regulatory changes while also absorbing unprecedented increases in medical cost trends,” the company said in a statement. “We believe the elevated Medicare Advantage medical costs are an industry dynamic, not specific to Humana, and that they may persist for an extended period or, in some cases, permanently reset the baseline.”
Humana also cited regulatory changes that are making its Medicare business more challenging. The Centers for Medicare & Medicaid Services recently made a number of moves that affect Medicare Advantage, including adjustments to the setup used in the business that links payment to the health level of enrollees. The agency also announced new rules about insurers’ processes for approving medical care. These trends may require insurers to raise prices or reduce benefits, Humana CEO Bruce Broussard said. “We just don’t want to fall off the cliff and lose hundreds of thousands of members,” he said.
Humana views 2024 as a year of transition as it continues to adjust to changes in Medicare Advantage regulation and utilization.
“While we currently anticipate 2024 earnings will be materially impacted by the higher than anticipated Medicare Advantage utilization trends and acknowledge uncertainty remains, we remain focused on mitigation activities, including administrative cost containment, productivity and trend initiatives,” the statement said. “In addition, we would reinforce our belief that the trends are impacting the industry broadly and to the degree they continue, expect them to be reflected in pricing, and have begun our 2025 bid planning work accordingly.”
Despite current challenges, the company believes it is on sound financial footing for the long term.
Related: UnitedHealth’s 4th-quarter medical costs surge to highest level since early pandemic
“We continue to believe the strong fundamentals of Medicare Advantage remain intact and the strength and scale of our platform and differentiated capabilities will allow us to effectively manage through the near-term uncertainty, compete effectively and deliver compelling shareholder returns over the long term,” the statement concluded.