(Reuters) -Humana forecast annual profit below Wall Street estimates on Tuesday as it anticipates a greater-than-expected decline in its Medicare Advantage plan enrolments following a planned exit from some markets.
The health insurer, a top provider of Medicare Advantage plans under which the U.S. government pays private insurers a set rate to manage healthcare for people aged 65 and older or with disabilities, has been struggling with elevated medical costs for the last few quarters.
The company expects a bigger decline in individual MA enrolments than expected in 2025 after it exits certain unprofitable plans and counties.
It forecast that its full-year individual MA memberships would decline by 550,000 members in 2025, compared to a previous expectation of membership to be “down a few hundred thousand”.
This is largely driven by a lower recapture rate for members affected by the planned exits along with higher-than-expected attrition in the company’s D-SNP plans, under which members are entitled to both Medicare as well as medical assistance under Medicaid.
Humana expects annual adjusted profit per share of about $16.25, compared to analysts’ estimate of $16.71 per share, according to data compiled by LSEG.
It expects first-quarter earnings to be about 60% to 65% of its 2025 profit, driven by the impact of the Inflation Reduction Act, changes in benefits and favorable seasonality.
Shares of the company rose 1.2% before the bell.
Humana reported a rise in its medical cost ratio, the percentage of premiums spent on medical care, to 91.5% from 90.7% a year earlier. Analysts had expected the ratio to be 91.32%.
It anticipates the ratio in its insurance segment to be about 87.5% in the first quarter and between 90.1% and 90.5% for 2025. Analysts expect its first-quarter medical loss ratio to be 89.08%, and 89.52% for the full year.
On an adjusted basis, Humana reported a fourth-quarter loss of $2.16 per share, in line with analysts’ estimates.
(Reporting by Sriparna Roy in Bengaluru; Editing by Pooja Desai)
