Humana’s Exiting Medicare Advantage in 13 Markets
Humana, one of the leading health insurance companies in the United States, recently announced its decision to exit 13 Medicare Advantage (MA) markets. This move, effective in 2025, will impact a significant portion of its Medicare Advantage membership. Despite this shift, it remains confident in its overall financial health and has reaffirmed its full-year guidance. This article will explore the reasons behind this decision, its impact on members, and the broader implications for Humana and the Medicare Advantage landscape.
Humana’s Exit from 13 Medicare Advantage Markets
Humana’s decision to exit 13 Medicare Advantage markets will have significant consequences for approximately 560,000 members. This represents about 10% of the company’s individual MA membership base. While these members will lose access to their current plans, Humana anticipates that it will be able to absorb nearly half of these members into alternative plans.
Impact on Members
Humana’s decision to leave these 13 markets means fewer Medicare Advantage options for members in the affected regions. However, Chief Financial Officer Susan Diamond has assured that nearly all impacted members have other plan options available. Despite these alternative plans, Humana expects to lose a few hundred thousand members as a result of the market exits.
Diamond emphasized that while member losses are expected, this outcome is not unusual when a company withdraws from specific markets. “That is not atypical when we do plan exits,” she noted during the Wells Fargo Healthcare Conference.
Reasons for the Exit
The primary reason for Humana’s exit from these markets is financial viability. Humana has been clear that the markets they are leaving were not expected to be profitable in the coming year. Rather than continuing to operate in unprofitable regions, the company has opted to exit these markets, even if it means losing members.
According to Diamond, “The exit itself is positive in the sense that those plans were not contributing.” She explained that even if it does not retain all the members from the exiting plans, the move is strategically beneficial for the company in the long run.
Financial Implications
Humana’s market exit follows a broader trend in the healthcare industry, where payers are responding to changes in federal regulations and market dynamics. While it has reaffirmed its full-year guidance, the company has had to make strategic adjustments following recent decisions from the Centers for Medicare & Medicaid Services (CMS).
Humana’s Guidance and Strategy
Humana slashed its financial guidance earlier in 2024 after CMS cut the Medicare Advantage benchmark rate by 0.16%. This reduction in reimbursement has forced large insurers like Humana to re-evaluate their offerings, often leading to reduced benefits and a smaller coverage footprint.
The company’s decision to exit certain Medicare Advantage markets aligns with its strategy of focusing on areas that will be financially sustainable and profitable. By cutting ties with underperforming markets, it hopes to strengthen its overall financial position. If the company retains more members than expected, the exit could be “incrementally positive,” according to Diamond.
Impact of CMS Decision
The CMS decision to cut the MA benchmark rate has had ripple effects across the industry. Many insurers, including Humana, have cited this rate cut as a reason for reducing benefits and limiting coverage areas. This rollback of benefits is expected to have a significant impact on members, particularly those enrolled in dual-eligible special needs plans.
However, Humana has noted that some of its plans, such as those designed for dual-eligible members, are performing well and are not facing the same challenges as other plans. These successful plans will remain part of Humana’s portfolio, even as the company exits unprofitable markets.
Changes in Benefits and Utilization
As Humana prepares for these market exits and adjusts its offerings, changes in member benefits and utilization patterns are expected. These changes will particularly affect supplemental benefits, which have become a critical part of many Medicare Advantage plans.
Supplemental Benefits and Utilization Trends
Humana has observed higher-than-expected inpatient utilization rates earlier in 2024, particularly in May. However, the company expects utilization to return to normal levels for the remainder of the year.
As 2024 comes to a close, Humana anticipates a significant increase in the use of supplemental benefits such as over-the-counter (OTC) cards, dental services, and fee benefit cards. This uptick in utilization is common in the final months of the year, but the company expects it to be especially pronounced in 2024 due to impending benefit changes in 2025.
“We are anticipating an even higher level of utilization in some of those services in the fourth quarter of 2024,” Diamond explained. She noted that members are likely to maximize their benefits before the reduced offerings in 2025 take effect.
Future Outlook for Members
While Humana’s exit from these markets will undoubtedly cause disruptions for some members, the company remains optimistic about its future. The decision to focus on profitable markets, combined with anticipated retention of a significant portion of its members, positions Humana to continue offering competitive Medicare Advantage plans in 2025 and beyond.
FAQs
1. Why is Humana exiting 13 Medicare Advantage markets?
A. Humana is exiting these markets because they are not expected to be profitable in 2025. This move is part of the company’s strategy to focus on financially sustainable markets.
2. What are the implications of the CMS rate cut?
A. The CMS decision to cut the Medicare Advantage benchmark rate by 0.16% has led to reduced benefits and a smaller coverage area for many insurers, including Humana.
3. Will members lose access to supplemental benefits?
A. Some members may experience changes in their benefits for 2025, leading to higher utilization of services like OTC cards and dental care before these benefits are reduced.
Conclusion
Humana’s exit from 13 Medicare Advantage markets marks a strategic shift for the company as it responds to financial challenges and regulatory changes. While this decision will impact hundreds of thousands of members, Humana is confident that it will retain a substantial portion of those affected. By focusing on profitable markets and adjusting its offerings, Humana aims to maintain its competitive position in the Medicare Advantage landscape.
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