Humana profit plunges on higher provisions for Obamacare business

(Reuters) - Humana Inc HUM.N reported a 28 percent drop in quarterly profit as it set aside more money to cover losses in its Obamacare business, and the company said it would discontinue next year most of these plans sold off public exchanges.

The U.S. health insurer, whose acquisition by rival Aetna Inc AET.N has been challenged by U.S. antitrust authorities, said it planned to shrink its individual commercial business to 156 counties next year from 1,351 currently.

Under the business, Humana offers individual insurance plans both on and off the public exchanges set up under President Barack Obama’s Affordable Care Act.

The company said it expected premiums of $750 million-$1 billion in 2017 from its Obamacare plans, way lower than the $3.4 billion estimated for 2016.

U.S. health insurers, including Anthem Inc ANTM.N and UnitedHealth Group Inc UNH.N, have been losing money in their Obamacare businesses due to high medical costs.

Humana set aside about $208 million more in the second quarter to cover losses in the business, which it currently operates in 15 U.S. states.

The company said it would shrink the business to 11 states next year and had already limited memberships in the four states where it no longer intended to offer the plans.

Humana had said in May it would exit the Obamacare business in some states.

The company and Aetna announced a deal on Tuesday to sell a portfolio of about 290,000 of their Medicare Advantage members in 21 states to Molina Healthcare Inc MOH.N to win U.S. antitrust approval for their merger.

Humana’s individual commercial memberships fell by nearly a quarter in the three months ended June 30.

Net income fell to $311 million, or $2.06 per share.

Excluding items, the company earned $2.30 per share, beating the average analyst estimate of $2.23, according to Thomson Reuters I/B/E/S.

Revenue rose 2 percent to $14.01 billion, topping the average estimate of $13.59 billion.

Reporting by Amrutha Penumudi in Bengaluru; Editing by Kirti Pandey