Centene, Humana Join Anthem in 4Q MLR Misses

by Jane Anderson

Health insurers continued to struggle with their medical loss ratios in the fourth quarter of 2019, with Humana Inc. and Centene Corp. each posting MLRs that missed analysts' expectations and indicated higher medical expenses in specific segments. Centene joined Anthem, Inc., in blaming costs from an early flu season in part for its elevated MLR, while Humana tagged shifts in its Medicare business for its own raised MLR. Anthem reported its earnings on Jan. 29.

Though Centene's earnings per share figure was in line with expectations, the insurer's full-year 2019 MLR was higher than expected: 87.3% versus the company's guidance range of 86.6% to 87.1%. "Based on our interpretation of the release, higher HIX [health insurance exchange costs] contributed most of the shortfall while flu costs were 'slightly higher than projected,'" Jefferies analyst David Windley said in a Feb. 4 investor note.

Jeff Schwaneke, Centene's executive vice president and chief financial officer, said during the company's Feb. 4 conference call that MLR varies from quarter to quarter based on members' out-of-pocket expenses. "The last quarter in the year tends to be higher, because the maximum out-of-pockets have been met and sometimes people try to get some services and other things done," Schwaneke said.

Humana reported "lower-quality" fourth-quarter earnings results, with a higher MLR even though the insurer beat analysts' expected earnings per share, Citi analyst Ralph Giacobbe said in a Feb. 5 investor note. The insurer earned $16.3 million in revenue during the fourth quarter and $64.9 million for 2019 overall, increases of 15% for the quarter and 14% for the full year.

Still, Humana's MLR came in at 86.6%, when analysts had anticipated an MLR of 85.6%. This continued the underperformance in MLR that troubled Humana throughout the year, said Evercore ISI analyst Michael Newshel in a Feb. 5 investor note.

"The key retail MLR was slightly above [consensus] though still ended the year at the low end of full-year guidance," Newshel said, adding that Humana officials blamed business that shifted to Medicare Advantage from Medicare Part D, which has a seasonally much lower MLR in the fourth quarter.

From Health Plan Weekly