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Earnings

Insurer Humana expects COVID-19 costs to shrink in 2021 due to vaccinations

(Reuters) - Health insurer Humana Inc said on Wednesday it expects costs related to COVID-19 treatment to decline in 2021 at a faster rate than demand for elective healthcare services to pick up, as more people get vaccinated against the new coronavirus.

Last year, as people avoided visiting hospitals teeming with cases of coronavirus infections, health insurers benefited from lower costs. But now, with COVID-19 vaccinations underway, healthcare utilization is expected to bounce back to normal levels.

“When COVID treatment costs begin to decline, the rate of decline will likely be steeper than the bounce back in non-COVID utilization, potentially creating a favorable impact,” Humana Chief Financial Officer Brian Kane said on a post-earnings conference call.

For fiscal year 2021, Humana said it expects a positive impact of $1.32 billion to $2.04 billion from depressed non-COVID utilization in its Medicare Advantage health plans.

The company said it expects to see double-digit percentage reductions to normal levels of healthcare utilization throughout the first few months of 2021, before the levels rise above normal towards the year-end.

It also said it expects COVID-19 treatment and testing costs of $525 million to $925 million in its Medicare business in 2021.

Humana forecast 2021 adjusted earnings per share largely below analysts’ estimates.

“Given the ongoing uncertainties regarding COVID, we view the guidance as reasonable, if not conservative,” Cantor Fitzgerald analyst Steven Halper said in a client note.

Humana reported a smaller-than-expected loss in the fourth quarter, as gains from lower demand for non-COVID healthcare services cushioned a hit from surging costs related to COVID-19 testing and treatment.

Excluding items, Humana reported a loss of $2.30 per share compared with analysts’ estimates of a $2.37 loss per share.

Reporting by Manojna Maddipatla in Bengaluru; Editing by Shinjini Ganguli

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