In the midst of two major takeovers in the home health and hospice space, insurance giant Humana (NYSE: HUM) is working on expanding its Medicare Advantage benefits.
Just last month, the Centers for Medicare & Medicaid Services (CMS) announced an expansion of supplemental benefits for MA plans in 2019, including the addition of non-skilled in-home supports. Humana executives stated during the company’s first quarter earnings call Wednesday that it is undergoing the 2019 bid process for MA plan benefits, but did not specify if non-skilled services are included in these bids, which are approved later in the year. CMS’ updates will also result in a 3% rate increase for Humana’s MA business.
“In April, CMS issued its final 2019 rate notice after many years of rate reductions following the implementation of the Affordable Care Act (ACA),” Bruce Broussard, CEO of Humana, said during the call Wednesday. “We are beginning to see a more favorable regulatory environment as a result of the growing support for Medicare Advantage. …A favorable rate notice is indicative of this tone.”
The comments come as Humana is currently acquiring 40% of the home heath and hospice operations of Kindred Healthcare (NYSE: KND) for $800 million, with its private equity partners, TPG Capital and Welsh, Carson, Anderson & Stowe (WCSA), acquiring the remaining 60%. The same consortium of companies is also acquiring Curo Health, one of the nation’s largest hospice providers, for $1.4 billion.
The transactions, which are expected to close in summer 2018, will effectively make Humana a part-owner in the nation’s largest home health care and hospice provider.
As Humana also seeks to grow its MA enrollment, expanding supplemental benefits and its reach across the care continuum is a core strategy.
In particular, executives stated they plan to further address social needs and determinants of health among their enrollees, as part of the expansion of supplemental benefits added for 2019. The same set of MA changes that could pave the way for more personal care services also could allow for insurance plans to cover food needs, home modifications, and a variety of other non-medical supports.
“We are pleased CMS is allowing MA plans [to add] tailored, flexible benefits to [address] the social determinants of health,” Broussard said. “Food insecurity and isolation can have a profound impact on health, and [they are] part of the continuum [of care we offer] in ensuring we are able to address these needs.”
While executives didn’t specify too far beyond addressing a few of the social determinants of health, they were bullish on the growing flexibility allotted to MA plans.
“The additional flexibility will allow us to include some target supplemental benefits that will directly address these types of needs,” Broussard said.
The comments echo those of executives from UnitedHealth Group (NYSE: UNH), another major insurer that is also planning to expand its benefits and leverage the policy changes to better care for MA enrollees.
During the first quarter of the year, Humana reported consolidated pretax income of $707 million, compared to $1.69 billion during the first quarter of 2017. The nearly billion-dollar difference was due to a net gain in 2017 associated with the termination of a merger agreement. At the same time, Humana raised its full-year guidance of adjusted earnings per share (EPS) to $13.70 to $14.10 from its previous range of $13.50 to $14.00.
Within its health care segment, which includes some home health care services, Humana reported a 5% decrease in revenue, or $295 million, for the quarter compared to the same time period in 2017, due in part from lower Medicare rates; losses associated with the company’s exit from the individual commercial business; a decline in pharmacy solutions revenue; and the optimization process with the company’s chronic care management programs. Revenue in the segment reached $5.66 billion in the first quarter of the year.
Humana’s stock was down more than 3% as of mid-day trading, hovering above $285 per share.
Written by Amy Baxter
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