Humana slumps due to Medicaid costs

Written by Alyssa Clark Humana is known throughout the country as one of the U.S.s leading health insurance providers, holding a firm position in the ...

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|Nov 7|magazine5 min read

Written by Alyssa Clark

 

Humana is known throughout the country as one of the U.S.’s leading health insurance providers, holding a firm position in the insurance market for the past 10 years. This past Wednesday, representatives from Humana said they are expected a substantial decline in earnings this next year due to health exchanges and the Medicaid program which caters to the U.S.’s poor.

Underneath the national healthcare reform law, Humana and other insurance providers began administering insurance plans to people on October 1st. These state-based exchanges will become active in 2014. Humana has also overseen care contracts with a few states, in terms of managing their Medicaid health plans.

Humana projects its price per share earnings in 2014 to be around $7.25 to $7.75, which is adding in the 50-90 cents for Medicaid and health exchange costs.

"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 research note.

In the year of 2013, Humana is still projecting earnings of $8.65 to $8.75 per share, which makes the substantial $1.40 drop stand out even more.

“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”.

Humana’s forecast for 2014 still aligns with analysts’ estimations, projecting the company to still gross $43 billion for the upcoming year.

“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 share. 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”, according to Thomson Reuters.

 

About the Author

Alyssa Clark is the Editor of Healthcare Global