13 Markets Exiting, Humana Optimizes Medicare Advantage Strategy
Humana, one of the largest providers of Medicare Advantage (MA) plans, recently reaffirmed its full-year financial guidance while announcing a significant shift in its business strategy. During the Wells Fargo Healthcare Conference, Chief Financial Officer Susan Diamond revealed the company’s plan to exit 13 Medicare Advantage markets by 2024. This decision, though impactful, is part of Humana’s ongoing effort to optimize its market presence and ensure long-term profitability.
Humana’s Medicare Advantage Market Exit
Why Humana is Leaving Certain Markets
According to Susan Diamond, the company is leaving markets where profitability is unlikely in the coming year. The company had hinted at enrollment decreases earlier in the year, and the decision to exit certain markets reflects this prediction.
“Nearly all of those members have other options,” said Diamond during the conference, explaining that a substantial portion of the impacted members would transition into other plans offered by Humana. However, she also acknowledged that a couple hundred thousand members would likely be lost due to the exit. These exits are not atypical for insurance providers when certain plans fail to meet financial targets.
By exiting unprofitable markets, Humana aims to focus on delivering value in regions where its plans are performing well. This strategic move, although it involves a reduction in membership, is seen as a net positive by the company.
Impact on Members
Humana’s decision will affect approximately 560,000 members, representing 10% of its individual Medicare Advantage membership base. However, Diamond anticipates that about half of those members will transition to other available Humana plans.
For members who will be impacted by the cutbacks, the options may be limited in certain geographical areas. This means that some will have fewer plans to choose from. However, Diamond reassured investors that Humana is committed to retaining as many members as possible and that the plans left behind after the exits are expected to be financially stronger.
Financial Implications of the Market Exit
Performance of Humana’s Dual Eligible Plans
While Humana is exiting some Medicare Advantage markets, not all of its plans are experiencing challenges. Diamond pointed out that some of Humana’s dual eligible special needs plans are performing exceptionally well and are not facing the same headwinds as other plans. These dual-eligible plans, which cater to individuals who qualify for both Medicare and Medicaid, are a critical component of Humana’s MA portfolio. The strong performance of these plans indicates that not all areas of the MA market are experiencing pressure, allowing Humana to maintain stability in other parts of its business.
Inpatient Utilization Trends
In addition to its market exit, Humana provided insights into utilization trends among its members. Inpatient utilization, which had been higher than anticipated earlier in the year, has now returned to normal levels. This normalization of utilization metrics is a positive sign for the company, as higher-than-expected inpatient usage can increase costs and negatively affect profitability.
Diamond also noted that while utilization trends are stabilizing, the company does expect higher signs of seasonality during the latter half of 2024. Specifically, members are expected to use supplemental benefits at elevated levels as the year draws to a close.
Anticipated Seasonality and Utilization in 2024
Supplemental Benefits Usage
As 2024 progresses, Humana expects to see increased utilization of supplemental benefits such as Over-The-Counter (OTC) cards, fee benefit cards, and dental services. This trend is not unusual, as many members typically use these benefits more frequently toward the end of the year.
However, Humana anticipates that this year will be particularly notable in terms of benefit usage. According to Diamond, members are likely to take full advantage of their benefits, knowing that changes are coming in 2025. The anticipation of reduced benefits in the following year is expected to drive higher utilization of services in the fourth quarter of 2024.
Impact of 2025 Benefit Changes
Looking ahead, Humana has already indicated that some benefits will be reduced in 2025. This announcement has created a sense of urgency among members, who are expected to use their benefits at an even higher rate in the last quarter of 2024. This elevated utilization is likely to have a financial impact on Humana’s operations, but it’s a trend the company is prepared for as it adjusts its offerings for the future.
FAQs
1. Why is Humana exiting 13 Medicare Advantage markets?
A. Humana is exiting markets where it does not expect to be profitable in the coming year. This decision is part of a broader strategy to optimize its financial performance.
2. How many members will be impacted by Humana’s market exit?
A. Approximately 560,000 members, or 10% of Humana’s individual Medicare Advantage membership, will be affected. Humana expects to retain about half of these members by transitioning them to other available plans.
3. What impact will this exit have on Humana’s financial performance?
A. Humana views the exit as a net positive. The company is leaving markets that are not contributing to profitability, and even if some members are lost, the remaining plans are expected to perform better financially.
4. Will Humana reduce any benefits in 2025?
A. Yes, Humana has announced that some benefits will be reduced in 2025, which may drive higher utilization of services in the last quarter of 2024.
Conclusion
Humana’s decision to exit 13 Medicare Advantage markets in 2024 reflects a strategic move to focus on more profitable areas while minimizing exposure to financial risk. While the exit will impact 560,000 members, Humana is confident it will retain many of them by transitioning them to other plans. Financially, the move is seen as a positive step, especially as unprofitable plans are removed from the company’s portfolio. With supplemental benefits usage expected to increase in late 2024 and benefit reductions planned for 2025, Humana is preparing for a busy year-end, but remains optimistic about its long-term financial health.
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