Nov 6 U.S. health insurer Humana Inc on
Wednesday said it expected earnings to decline next year because
of spending on the new health exchanges and on the Medicaid
program for the poor.
Humana and its competitors began selling insurance plans to
individuals on Oct. 1 on state-based exchanges created under the
national healthcare reform law. Those plans take effect in 2014.
The company also has managed care contracts with some states
for their Medicaid health plans.
Humana said it expected 2014 earnings of $7.25 to $7.75 per
share, including 50 cents to 90 cents in Medicaid and health
Analysts on average were expecting a profit of $8.69 per
share for the year, according to Thomson Reuters I/B/E/S. It was
not immediately clear if that consensus figure included any
spending on those investments.
For 2013, the company said it still expected earnings of
$8.65 to $8.75 per share.
Shares of Humana were down 3.2 percent at $90.99 in trading
before the market opened.
"Although we expect shares to react negatively to the
guidance, we find the outlook somewhat reassuring as it implies
general stability in core operations/margins offset by
semi-discretionary and transient upfront investment spending,"
Susquehanna Financial Group analyst Chris Rigg said in a
Humana forecast 2014 revenue of at least $43 billion, in
line with analysts' expectations.
Third-quarter net income at Humana fell to $368 million, or
$2.31 per share, from $426 million, or $2.62 per share, a year
earlier. The results beat analysts' expectations of $2.15 per
Revenue rose 7 percent to $10.32 billion from $9.65 billion
a year earlier, but the company paid out more in claims and had
higher operating costs.
Goldman Sachs analyst Matthew Borsch said Humana's outlook
for 2014 Medicare Advantage membership growth and profitability
was more positive than those for UnitedHealth Group Inc
and WellPoint Inc.
Private Medicare for older people, or Medicare Advantage,
makes up the largest portion of Humana's revenue, accounting for
$6.75 billion in the third quarter. The company had 2.04 million
Medicare Advantage customers in its direct-to-consumer business
and another 425,000 through its employer-based business.
Humana expects to add 260,000 to 305,000 Medicare Advantage
customers in 2014.
The company had a total of 12.4 million medical members at
the end of September.
State-based Medicaid services are its fastest-growing
membership base. Humana added 30,000 new members from a year
earlier for a total of 80,000.