Humana Plans Medicare Offerings - Analyst Blog

In accordance with the U.S. Securities and Exchange Commission, Humana Inc. (HUM) has released its planned Medicare Advantage and Prescription Drug Plan (PDP) offerings for 2011 after receiving consent from the federal government. The enrollment for the offering will begin on November 15.
 
Though Humana has only provided the initial plans of its offering, the specific details will be issued around October 1.
 
The highlights of Humana's Medicare offerings are as follows:
 
    •    PDPs will be offered statewide in 50 states of the District of Columbia and Puerto Rico, including a  nationwide PDP co-branded with Wal-Mart Stores Inc. (WMT);
 
    •    Health maintenance organizations' (HMO) plans will be offered in 352 counties in 26 states and Puerto Rico;
 
    •    Local preferred provider organizations (PPO) plans will be offered in 1,278 counties in 39 states and Puerto Rico;
 
    •    Regional PPO plans will be offered in 23 states in 14 Medicare Advantage regions;
 
    •    Full-network Private Fee-for-Service (PFFS) plans will be offered in 851 counties in 34 states;
 
    •    Partial-network PFFS plans (networked for ancillary services only) will be offered in 966 counties in 28 states;
 
    •    Non-network PFFS plans will be offered in 18 counties in two states.
 
During the second quarter, revenues of Humana climbed 10.0% year-over-year to $8.65 billion along with the increase in revenues from premium and administrative services fees on the back of growth in membership for the health insurer's Medicare Advantage plans and strict pricing across all lines of business. The increase was partially offset by the decline in Humana's membership in the stand-alone Prescription Drug Plan and commercial plans.

Government membership as of June 30, 2010, stood at 7.0 million, which reflected an increase of 1.4% year-over-year, while Commercial membership as of June 30, 2010, stood at 3.3 million, posting a decline of 4.7% year-over-year. Total medical membership however plunged 0.7% year-over-year to 10.3 million. Humana's Medicare Advantage membership at the end of the second quarter jumped nearly 17.4% from the prior-year quarter.
 
We believe that Humana enjoys strong earnings from the Government segment, but remain concerned about the weakness in the Commercial segment, whose membership fell 4.7% year-over-year as the employer-sponsored insurance enrollments declined in the sluggish economy.

Apart from the concerns of Commercial membership, Humana is also expected to face the headwinds of uncertainties related to the implementation of health insurance reforms recently passed into law. We expect them to stretch profit margins, with downward pressure likely to overshadow the stock.

Currently, Humana carries a Zacks #3 Rank, which translates into a short-term Hold recommendation, indicating no clear directional pressure on the shares over the near term.

 

 
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