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Humana increases profit, tightens business focus

Posted On: Apr. 29, 2015 12:00 AM CST

Humana Inc. reported gains in net income and premiums on Wednesday and a tighter focus on the Medicare and health insurance exchange markets.

The Louisville, Kentucky-based health insurer reported net income of $430 million for the first quarter of 2015, a 16.8% increase over the same period a year ago, while premium volume rose 19.5% to $13.2 billion.

In a conference call with analysts, Humana President and CEO Bruce D. Broussard said the health insurer notched record-high pretax earnings in the quarter, and recorded growth in its Medicare Advantage business.

“We had substantial membership growth in our Medicare Advantage stand-alone (prescription drug program) and Humana One products,” Mr. Broussard said, noting that the Centers for Medicare & Medicaid Services recently released final 2016 Medicare rates.

“While we were encouraged by the first rate increase in seven years, it still lags fee-for-service cost trends. Additionally, the transition by CMS to a new risk risk-adjusted model will negatively impact certain of our markets that are leading the country in value-based reimbursement methods and holistically assisting members with complex, chronic conditions,” he said.

Mr. Broussard said the company also is looking to public health insurance exchanges for growth.

“Entering a new customer segment is never an easy task,” he said. “However, we believe that health care exchanges are a leading example of the ongoing movement to the retail model, where we have been so effective in Medicare.”

This renewed focus was a factor in the company's decision to sell its occupational medicine, physical therapy and urgent care business unit, Concentra Inc., Mr. Broussard said.

“We review each of our businesses on an ongoing basis to ensure that each earns its cost of capital and is aligned with our integrated care delivery strategy,” he said. “Our subsequent medical services organization acquisitions and joint venture investments provided a more integrated primary care platform than Concentra.”