Humana said it will spend $1 billion to “fund growth and investment” in its Medicare Advantage business following a disclosure the health insurer would add fewer seniors to such plans than expected for 2022.
The announcement came Wednesday as part of the health insurer’s fourth quarter 2021 earnings report that showed a $60 million loss, which was narrower than the year-ago period’s $458 million loss. Revenues grew 10% to $21 billion compared to $19 billion in the year-ago period.
Humana is a big player in Medicare Advantage plans that contract with the federal government to provide extra benefits and services to seniors, such as disease management and nurse help hotlines with some also offering vision, dental care and wellness programs.
But Humana last month surprised investors and the industry by disclosing it was “decreasing its net membership growth estimate for its individual Medicare Advantage products for the year ended December 31, 2022 to a range of 150,000 to 200,000 members from the previous range of 325,000 to 375,000 members.” That revised estimate was attributed to “higher than anticipated terminations” during the annual open enrollment period.
To return to growth, Humana said it will commit to “performing a critical review of ongoing strategic initiatives across the company” including evaluation of its real estate portfolio.
“This will create capacity to fund growth,” Humana chief executive Bruce Broussard told analysts Wednesday morning during a call to discuss earnings. “We are pushing the organization to be more efficient.”
Humana’s slower-than-expected growth in its Medicare Advantage business comes during perhaps the most competitive time in the history of the program due to new plans entering the business offering seniors an unprecedented number of choices. Established rivals like UnitedHealth Group, CVS Health’s Aetna health insurance unit are expanding into new markets while a flurry of startups and smaller health insurers have entered the business, seeing a market of more than 10,000 Americans a day turning 65 years old and becoming eligible for Medicare and Medicare Advantage in particular.
Broussard also said it is taking steps to make Humana’s Medicare Advantage offerings more attractive to seniors by enhancing healthcare services the plans offer. Humana last month disclosed plans to expand its physician-staffed primary care clinics into three more states, increasing to more than 240 the number of such centers the health insurer operates by the end of this year.