(Reuters) - Humana Inc (HUM.N) reported a much higher-than-expected first-quarter profit on Wednesday, but the health insurer expressed uncertainty about 2014, when lower government rates for private Medicare insurance take effect.
About two-thirds of Humana’s revenue comes from Medicare Advantage, a private Medicare plan for which the company is reimbursed by the government. Humana said the rates, announced a month ago, were higher than first proposed, but remained challenging, “making 2014 earnings growth uncertain at this time.”
Shares of Humana and other insurers jumped as a result of the rate announcement, setting off an investigation by the government’s Medicare division. It is looking into whether a leak occurred after the news was disseminated early by a firm that specializes in such intelligence. Humana has said it opened its own investigation.
Competitors UnitedHealth Group Inc (UNH.N), WellPoint Inc WLP.N and Aetna Inc (AET.N), which all offer private Medicare, have also said in the past two weeks that they believe the Medicare Advantage pricing from the government will be difficult in 2014.
Humana’s net income nearly doubled to $473 million, or $2.95 per share, from $248 million, or $1.49 per share, a year earlier.
The company said results were 26 cents a share higher than expected because it received a boost from claims settlements that went in its favor and due to a delay until after the quarter ended in U.S. government sequestration, which cut payments in the Medicare program for older people.
Even excluding that 26 cents, earnings of $2.69 a share were far higher than the $1.81 that analysts polled by Thomson Reuters I/B/E/S were expecting on that basis.
Revenue rose far less sharply than earnings, increasing 2.6 percent to $10.49 billion because of higher enrollments in individual and Medicare health plans.
Humana raised its 2013 outlook to a range of $8.40 to $8.60 per share because of the stronger-than-expected first quarter. It had previously forecast $7.60 to $7.80. Analysts were expecting $7.99.
For the second quarter, the company said it expected earnings of $2.40 to $2.50 per share, above the analysts’ estimate of $2.31.
Reporting by Caroline Humer; Editing by Lisa Von Ahn