Feb 6, 2019 10:43am
Humana is expected to bleed a significant number of members from
its Part D plans, as greater competition has chipped away at the company’s
market share.
Brian Kane, Humana’s chief financial officer, said on the
company’s earnings call
Wednesday morning that the insurer expects to lose between 700,000 and 750,000
members in its stand-alone Medicare prescription drug plans in 2019. That is a
decrease in projections from November, when Humana estimated that as many as
800,000 people could drop from its Part D rolls.
As more competitors have entered the Part D market, Humana’s
plans are no longer consistently the lowest cost, which is leading some members
to switch to other insurers, Kane said. Humana is now working to “innovate” the
value proposition in their plans.
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“While it will take time,
we intend to stay competitive,” CEO Bruce Broussard said.
Though Humana expects a downturn in enrollment in its Part D
plans, it is still projecting about 4.5 million enrollees in those plans,
according to its earnings documents.
Policy changes in Part D add another wrinkle to this discussion,
Kane said, but Humana is rethinking its approach in that market irrespective of
how proposals play out.
That said, should the Department of Health and Human Services
finalize its plan to end drug rebate
protections in Part D for the 2020 plan year, that change
would be “material” and would have significant implications for how these plans
function, he said.
The biggest risk, he said, is a potential adverse selection in
pricing if the approach to negotiation is fundamentally changed. In addition,
Humana is also concerned that the policy change is likely to drive up premiums
in Part D plans.
“There’s a whole host of complexity that has to be worked
through,” Kane said. “It will have a meaningful impact, the timing of which is still
uncertain.”
Broussard said that policy changes like this may be indicative
that the Part D market, in its current form, “has run its course,” and it is
time for a broad change in how it functions.
However, he noted that the drug rebate proposal isn’t
necessarily taking money out of the system or bringing down revenue for plan
sponsors or drug companies, it’s just moving money that is already in Part D
around.
He said Humana will offer further perspective on the Part D
rebate proposal in a formal commentary.
Though Humana reported a downturn for enrollment in its Part D
plans, its Medicare Advantage business was a bright light in 2018 and is a key
source of the company’s momentum heading into the 2019 fiscal year.
Medicare Advantage a bright spot
Humana reported a 6% increase in revenue for 2018, reaching
$56.91 billion compared to $53.77 billion in 2017. Fourth quarter revenues were
also on the rise, totalling $14.07 billion, a 7% uptick from $13.10 billion in
Q4 2017.
As the health insurance fee was pushed off to 2020,
Humana was able to invest significantly in improved service for its MA plans,
Broussard said. The Centers for Medicare & Medicaid Services set strong rates for MA in the
2019 plan year, as well, he said, so that growth is expected to
continue this year.
Humana expects to add 370,000 to 400,000 seniors to its MA plans
in 2019, increasing its membership by 12% to 13%. Kane said the company also
expects to add about 30,000 people to its group Medicare Advantage plans.
“We are pleased with the consistency of ongoing improvement in
our performance,” Broussard said.
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