Humana Withdraws Its Already Lowered 2025 Profit Guidance

On Wednesday, Humana Inc HUM, in its first quarter earnings remarks, said the company withdrew its already lowered 2025 profit forecast, citing disappointing government Medicare Advantage (MA) reimbursement rates.

The insurance firm said the final MA rate notice is not sufficient to address the current medical cost trend environment.

Humana’s medical benefit ratio – the percentage of premiums spent on medical care – rose to 88.9% in the first quarter.

In its fourth quarter 2023 earnings release, Humana said, “Although we intend to prioritize margin recovery over membership growth in the near term, we no longer believe the previously communicated $37 Adjusted EPS target for 2025 is achievable.”

“It is our intent to deliver $6 to $10 of Adjusted EPS growth in 2025 through MA pricing actions, earnings growth in other lines of business, as well as our ongoing productivity and trend mitigation initiatives,” the company added.

In its first quarter 2024 earnings, the company said: “Considering the significant difference between the final rate notice and our previous funding assumption, combined with the inherent pricing limitations imposed by the Total Beneficiary Cost (TBC) change thresholds, we no longer believe $6 to $10 of Adjusted EPS growth is the appropriate target range for 2025.”

Humana said, “Our 2025 Adjusted EPS growth outlook will be impacted by several variables into which we will not have clear visibility until later this year. As a result, we believe it is prudent to provide more specific guidance for 2025 once we have greater clarity.”

Humana noted that pricing decisions for the 2025 MA bids are being finalized and will be submitted by the first Monday in June.

The company will provide an update on bid strategy post finalization, with a further update in the Fall once we have visibility into competitor plans and expected membership implications.

Price Action: HUM shares are down 3.75% at $315.68 at the last check Wednesday.