Humana, a leading provider of Medicare Advantage (MA) plans, announced a projected annual profit below Wall Street estimates for 2025. This projection stems from an anticipated decline in MA enrollments following the company’s strategic withdrawal from specific markets. The announcement came on Tuesday, alongside the company’s fourth-quarter earnings report.
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Humana has been grappling with rising medical costs in recent quarters, a trend impacting the broader healthcare industry. The company’s decision to exit certain unprofitable plans and counties is expected to result in a significant reduction in individual MA memberships for 2025.
Medicare Advantage Enrollment Decline Exceeds Expectations
The health insurer now forecasts a decrease of 550,000 individual MA members in 2025. This figure surpasses the previous estimate of a “few hundred thousand” and underscores the challenges Humana faces in the increasingly competitive MA market. The decline is primarily attributed to a lower recapture rate for members affected by the planned market exits and higher-than-expected attrition in the company’s Dual-Eligible Special Needs Plans (D-SNPs). D-SNPs cater to individuals eligible for both Medicare and Medicaid.
Profit Forecast and Market Reaction
Humana anticipates annual adjusted profit per share of approximately $16.25 for 2025, falling short of analysts’ consensus estimate of $16.71 per share, according to LSEG data. Despite the lower profit outlook, Humana’s shares saw a modest pre-market increase of 1.2%. The company also projected that its first-quarter earnings would represent roughly 60% to 65% of its full-year 2025 profit, influenced by factors such as the Inflation Reduction Act, benefit adjustments, and typical seasonal patterns.
Medical Cost Ratio Remains a Key Metric
Humana reported a medical cost ratio (MCR) of 91.5% for the fourth quarter, up from 90.7% in the same period last year. The MCR represents the percentage of premiums allocated to medical care. Analysts had anticipated a ratio of 91.32%. Looking ahead, Humana projects an insurance segment MCR of approximately 87.5% for the first quarter and between 90.1% and 90.5% for the full year 2025. These figures compare to analyst expectations of 89.08% for the first quarter and 89.52% for the full year.
Fourth-Quarter Results
Humana reported a fourth-quarter adjusted loss of $2.16 per share, aligning with analysts’ estimates. The company’s financial performance reflects the ongoing pressures within the healthcare sector, particularly related to managing medical costs and maintaining profitability in the Medicare Advantage market.
Conclusion
Humana’s lower-than-expected profit forecast for 2025 highlights the complexities of the Medicare Advantage landscape. The company’s strategic decisions, coupled with broader industry trends, will continue to shape its financial performance in the coming year. While the projected enrollment decline presents challenges, Humana’s pre-market stock bump suggests investor confidence in the long-term viability of its business model.
