|
Humana Inc. will exit the
commercial insurance business and focus exclusively on government books of
business, the company said on Feb. 23. Industry analysts say it was a wise
strategic move, and experts tell AIS Health that the decision will have a
marginal impact on Humana’s profits.
Humana said that “following a
strategic review,” it has decided to shelve its Employer Group Commercial
Medical Products (FEHB) business — which includes all fully insured,
self-funded and Federal Employee Health Benefit plans — over the next 18 to
24 months. A press release said the division “was no longer positioned to sustainably
meet the needs of commercial members over the long term or support the
company’s long-term strategic plans.”
Wall Street praises
pivot
- In line with
past positive reviews of Humana’s value-creation plan and hospice
divestment, industry analysts had favorable views of the firm’s decision
to exit the employer plan business.
- “If you look at
their commercial business, relative to the size of their other
businesses, it’s very, very small. I think in 2022 the commercial
revenue was under $5 billion,” Michael Dion, vice president at Moody’s
Investors Service, tells AIS Health. “Their Medicare Advantage business,
which was their biggest business, was nearly $76 billion.”
- There is
another straightforward consideration that Dion thinks is driving the
pivot: The commercial division is “not really making money — in fact,
it’s losing money,” based on Moody’s estimates.
- Joe Paduda,
principal of Health Strategy Associates, says that the size of Humana’s
commercial business was likely its downfall: “As one of the smaller
national health plans, Humana likely suffered from a lack of negotiating
power with providers, with negative consequences for premiums and
employer costs,” he says.
Humana will invest
capital, target growth in providers
- Michael Abrams,
principal of Numerof & Associates, points out that Humana is
diversifying — just not in the same way as larger managed care firms.
- “They’re not
pulling in their horns entirely. They're still pursuing” growth, Abrams
says. “They're getting into clinic-based primary care… slowly and
thoughtfully. The primary care is oriented to seniors, and so it’s
synergistic with their focus on Medicare Advantage. And I’m sure that
they can see the potential of controlling the value chain all the way
down to the customer.”
- “It’s about
vertical integration,” explains Dean Ungar, vice president at Moody’s.
“I think if you look at where Humana has been investing, it’s been in
CenterWell. It’s their clinics, it’s their home health. It kind of fits
in with Medicare Advantage. It’s really part of rounding out the focus
on the Medicare Advantage population, whereas the commercial population
was a non-core activity for them.”
|
No comments:
Post a Comment