Humana announced its earnings and revenue for the fourth quarter of 2023 on January 25, 2024. The company reported $106.4 billion in revenue and $2.5 billion in profit for the full year 2023. While revenue grew about 15% compared to 2022, when it reported $92.9 billion, profits declined slightly year-over-year from $2.8 billion.
The health insurer is bracing for an “unprecedented” surge in medical costs, impacting its earnings throughout 2024 and also putting its 2025 profit target of $37 per share out of reach.
Medical costs for health insurers were elevated during 2023, and picked up even more during Q4 as people, especially older adults, returned to the hospitals to undergo procedures that were delayed during the COVID-19 pandemic, such as joint replacements.
“We believe the elevated (Medicare Advantage) medical costs are an industry dynamic, not specific to Humana, and that they may persist for an extended period or, in some cases, permanently reset the baseline,” Humana said.
In the first 24 hours since Humana reported its financial results for the quarter, the company’s shares slipped by 11.2%. Humana’s forecast also brought down the shares of some of its peers, with Cigna, CVS Health, Centene and UnitedHealth falling an average of 3%. This will certainly have an impact on these companies’ forecasts for 2024 and beyond.
“I think the whole industry will possibly reprice,” said Humana CEO Bruce Broussard. “I don’t know how the industry will take this kind of increase in utilization, along with regulatory changes that will persist in 2025 and 2026.”
Humana’s core business in Medicare Advantage witnessed a surge in outpatient services, including orthopedic surgeries, and a rise in inpatient care during November and December, driven by seasonal respiratory diseases.
In response to the anticipated trend in elevated utilization, Humana set its 2024 guidance at $16 in earnings per share, with $113 billion in consolidated revenue. However, they acknowledged the “greater inherent uncertainty” and expressed willingness to amend their guidance should trends improve throughout the year.
Chief Financial Officer Susan Diamond mentioned that Humana is basing its guidance on claims data, yet uncertainties remain regarding federal actions, particularly the annual Medicare Advantage rate notice. The company anticipates adjustments in response to competitors’ pricing strategies and potential shifts in utilization trends. Additionally, the company affirmed a 1.8% growth rate in Medicare Advantage membership for 2024, aiming to add approximately 100,000 new lives.
“The other big dependency is going to be… the level of competitor action and need to take pricing as well,” Diamond said. “And so that, we will continue to watch peer commentary in terms of their results and signals that they send, but that is something that we will have to consider based on the pricing action we ultimately take, of what impact might that have to near-term membership growth.”
Alongside its earnings, Humana announced that it has named David Dintenfass to the newly-created role of President of Enterprise Growth, where he will focus on growth for Humana’s insurance business.
