A Louisville, Kentucky office building owned by Humana Inc. displayed signage on Saturday, February 2, 2019, indicating that the company was set to release its earnings figures on February 6. Despite this, Humana’s stock experienced a decline of more than 10%. The insurer heavily relies on private Medicare plans, particularly Medicare Advantage, compared to its competitors.
The announcement of Humana’s earnings puts additional pressure on insurers already dealing with high medical costs and challenges arising from the recent cyberattack on UnitedHealth Group’s tech unit. This has negatively impacted Medicare Advantage businesses which have historically been sources of growth and profits for the insurance industry.
On Monday, February 4th, the Centers for Medicare and Medicaid Services (CMS) announced that government payments to Medicare Advantage plans are expected to increase by 3.7% compared to the previous year. However, after accounting for certain assumptions, this translates to a slight decline in the final rate of 0.16%, according to insurers and analysts. Despite CMS usually increasing the rate from the initial proposal, this final rate remains unchanged from a proposal made in January.
The rate set by CMS dictates how much insurers can charge for monthly premiums and plan benefits offered to customers, ultimately affecting their profitability. Medicare Advantage is a privately run health insurance plan contracted by Medicare with over half of Medicare beneficiaries enrolled in such plans due to lower premiums and additional benefits not covered by traditional Medicare as reported by health policy research firm KFF
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