- Continues emphasis on actions to alleviate financial burdens
and other hardships for its members, providers, employees, and
communities during the COVID-19 pandemic
- Achieves 92 percent, or 4.1 million of the company's Medicare
Advantage members currently enrolled in 4-Star and above contracts
for 2021, including 960,000 members in 4.5 Star contracts and a
5-Star rated contract in Florida
- Reports 3Q20 earnings per diluted common share (EPS) of $10.05
on a GAAP basis, $3.08 on an Adjusted basis; reports YTD 2020 EPS
of $27.37 on a GAAP basis, $21.04 on an Adjusted basis
- GAAP amounts include the impact of certain one-time
non-operational items, including a market gain from publicly traded
investments and the receipt of unpaid risk corridor payments
previously written off
- Updates FY 2020 EPS guidance, now anticipating GAAP EPS to be
in a range of $24.70 to $24.95 and Adjusted EPS in a range of
$18.50 to $18.75
- FY 2020 EPS guidance reflects fourth quarter 2020 losses of
approximately $2.55 per share on a GAAP basis, approximately $2.40
per share on an Adjusted basis
- As previously noted, Humana anticipates fourth quarter losses
to reflect the continued support for its constituents, along with
the impact of increasing utilization, and COVID-19 testing and
treatment costs
- Increases full year expected individual Medicare Advantage
membership growth to approximately 375,000 members from the
previous range of 330,000 to 360,000 members, representing expected
year-over-year growth of approximately 10 percent
Humana Inc. (NYSE: HUM) has continued to focus on its most
vulnerable members and communities throughout the ongoing COVID-19
pandemic by taking actions to simplify access to care, reduce
financial barriers, and address social determinants of health,
while also alleviating administrative difficulties and monetary
burdens for its providers to ensure efficient, consistent care for
their patients.
Humana has leveraged its clinically focused integrated care
delivery model to stand up initiatives to support the return to
care amid the pandemic, including waiver of all cost sharing for
in-network primary care, outpatient behavioral health, and
telehealth visits for its Medicare Advantage members, the
distribution of in-home preventive screening kits, establishment of
a clinical outreach team to proactively engage with the company's
most vulnerable members, and a multi-sector advertising campaign
designed to encourage members to stay connected with their
providers.
Utilization continued to rebound throughout the quarter,
reaching approximately 95 percent of historic baseline levels at
the close of the third quarter. Utilization resumed at a faster
pace for fully-insured group commercial medical members in the
Group and Specialty segment, compared to a more gradual return for
senior and Medicaid members in the Retail segment.
Results of operations in the quarter were impacted by increasing
utilization, COVID-19 testing and treatment costs, as well as the
financial impact of the company's ongoing crisis relief efforts. As
utilization levels continue to normalize and the company persists
with support to its members, providers, employer groups, and
communities, Humana maintains the expectation that its results of
operations in the back half of 2020 will entirely offset the
significant outperformance experienced in the first half of the
year that resulted from historically low utilization levels.
Humana will continue to monitor the pandemic's impact on the
company and remains committed to all of its stakeholders to adjust
its response accordingly, proactively leveraging its integrated
care delivery model to best serve its members, partnering with
federal and state governments to develop comprehensive and
actionable response plans, minimizing the impact on its provider
partners, and advancing the long-term sustainability of the company
and the healthcare system.
“We continue to see more Medicare beneficiaries choosing
Medicare Advantage (MA) plans over Medicare-Fee-For-Service due to
MA’s ever-increasing value proposition. What’s driving this strong
value is the fact that plans must constantly innovate to stay
competitive as Medicare beneficiaries have the freedom to choose a
plan that’s affordable for them and that suits their lifestyle
needs. For example, about 60 percent of our members are in $0
premium plans and enjoy supplemental benefits not included in
Medicare-Fee-For-Service, like dental, vision, hearing, access to
healthy foods, and gym memberships,” said Bruce D. Broussard,
Humana’s President and Chief Executive Officer. “Also, because the
MA program rewards for quality through CMS’s Five-Star Quality
Rating System, it encourages health plans like Humana to be
proactive and to take a holistic approach to managing the care of
its members. Based on Humana’s recently announced Stars ratings, we
continue to be a leader among our peers, with 4.1 million, or 92
percent, of our MA members currently enrolled in plans rated
4-stars or higher.”
Summary of Quarterly and Year to Date
Results
Humana today reported consolidated pretax income and diluted
earnings per common share (EPS) for the quarter ended September 30,
2020 (3Q20) versus the quarter ended September 30, 2019 (3Q19) and
for the nine months ended September 30, 2020 (YTD 2020) versus the
nine months ended September 30, 2019 (YTD 2019) as noted in the
tables below.
Humana’s 3Q20 and YTD 2020 GAAP results of operations were
impacted by both the market gain resulting from the initial
conversion of the company's prior ownership interest in certain
privately held companies (primarily Oak Street Health, Inc.) into
publicly-traded common stock upon such companies initial public
offering (IPO) during 3Q20 and the subsequent changes in the market
value of such securities from their IPO through the end of the
quarter, as well as the receipt of unpaid risk corridor payments
that were previously written off. The 3Q20 receipt of the risk
corridor payments was associated with losses incurred by the
company under the Affordable Care Act (ACA) business in 2014 to
2016. The receipt of these risk corridor payments accounted for
less than 50 percent of the company’s accumulated pretax losses
from its ACA businesses during that time period. The impact of both
the fair market value change and the receipt of the unpaid risk
corridor payments have been excluded in the company’s 3Q20 and YTD
2020 Adjusted (non-GAAP) consolidated results of operations.
Consolidated income before income taxes
and equity in earnings (pretax income) In millions
3Q20 (a)
3Q19 (b)
YTD 2020 (c)
YTD 2019 (d)
Generally Accepted Accounting
Principles (GAAP)
$1,755
$888
$5,058
$2,863
Amortization associated with identifiable
intangibles
23
17
66
53
Put/call valuation adjustments associated
with company's non-consolidating minority interest investments
(7
)
(82
)
63
(217
)
Change in fair market value of
publicly-traded equity securities
(643
)
—
(643
)
—
Receipt of commercial risk corridor
receivables previously written off, net
(578
)
—
(578
)
—
Charges associated with workforce
optimization
—
46
—
46
Adjusted (non-GAAP)
$550
$869
$3,966
$2,745
Diluted earnings per common share
(EPS)
3Q20 (a)
3Q19 (b)
YTD 2020 (c)
YTD 2019 (d)
GAAP
$10.05
$5.14
$27.37
$16.24
Amortization associated with identifiable
intangibles
0.13
0.10
0.38
0.29
Put/call valuation adjustments associated
with company's non-consolidating minority interest investments
(0.03
)
(0.47
)
0.37
(1.23
)
Change in fair market value of
publicly-traded equity securities
(3.72
)
—
(3.73
)
—
Receipt of commercial risk corridor
receivables previously written off, net
(3.35
)
—
(3.35
)
—
Charges associated with workforce
optimization
—
0.26
—
0.26
Adjusted (non-GAAP)
$3.08
$5.03
$21.04
$15.56
The company has included financial
measures throughout this earnings release that are not in
accordance with GAAP. Management believes that these measures, when
presented in conjunction with the comparable GAAP measures, are
useful to both management and its investors in analyzing the
company’s ongoing business and operating performance. Consequently,
management uses these non-GAAP (Adjusted) financial measures as
indicators of the company’s business performance, as well as for
operational planning and decision making purposes. Non-GAAP
(Adjusted) financial measures should be considered in addition to,
but not as a substitute for, or superior to, financial measures
prepared in accordance with GAAP. All financial measures in this
press release are in accordance with GAAP unless otherwise
indicated. Please refer to the footnotes for a detailed description
of each item adjusted out of GAAP financial measures to arrive at a
non-GAAP (Adjusted) financial measure.
Please refer to the tables above, as well as
the consolidated and segment highlight sections in the detailed
earnings release for additional discussion of the factors impacting
the year-over-comparisons.
In addition, below is a summary of key
consolidated and segment statistics comparing 3Q20 to 3Q19 and YTD
2020 to YTD 2019.
Humana Inc. Summary of Quarterly
Results (dollars in millions, except per share amounts)
3Q20 (a)
3Q19 (b)
YTD 2020 (c)
YTD 2019 (d)
Consolidated results:
Revenues - GAAP
$20,075
$16,241
$58,093
$48,593
Revenues - Adjusted
$18,823
$16,241
$56,841
$48,593
Pretax income - GAAP
$1,755
$888
$5,058
$2,863
Pretax income - Adjusted
$550
$869
$3,966
$2,745
Diluted EPS - GAAP
$10.05
$5.14
$27.37
$16.24
Diluted EPS - Adjusted
$3.08
$5.03
$21.04
$15.56
Benefits expense ratio - GAAP
82.6%
85.0%
81.4%
85.2%
Benefits expense ratio - Adjusted
85.3%
85.0%
82.3%
85.2%
Operating cost ratio - GAAP
13.0%
11.7%
12.2%
10.9%
Operating cost ratio - Adjusted
13.2%
11.4%
12.3%
10.8%
Operating cash flows - GAAP
$1,815
$2,442
$5,356
$4,772
Parent company cash and short term
investments
$2,422
$1,674
Debt-to-total capitalization
33.0 %
34.3%
Retail segment results:
Revenues - GAAP
$16,741
$14,088
$50,464
$42,259
Benefits expense ratio - GAAP
85.1%
85.9%
83.3 %
86.4%
Operating cost ratio - GAAP
11.2%
9.3%
10.0 %
8.7%
Segment earnings - GAAP
$553
$639
$3,227
$1,960
Segment earnings - Adjusted
$557
$643
$3,239
$1,972
Group and Specialty segment
results:
Revenues - GAAP
$1,794
$1,889
$5,494
$5,650
Benefits expense ratio - GAAP
93.0%
86.3%
79.6%
83.0%
Operating cost ratio - GAAP
25.2%
21.9%
24.0%
21.9%
Segment earnings (loss) - GAAP
($160)
$4
$232
$174
Segment earnings (loss) - Adjusted
($159)
$5
$235
$177
Healthcare Services segment
results:
Revenues - GAAP
$7,131
$6,602
$21,157
$19,087
Operating cost ratio - GAAP
96.4%
96.2%
95.8%
96.3%
Segment earnings - GAAP
$249
$212
$816
$611
Adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA) (e)
$327
$283
$1,036
$815
2020 Earnings Guidance
Humana today adjusted its GAAP and Adjusted EPS guidance ranges
for the year ended December 31, 2020 (FY20). The company now
expects its FY20 GAAP EPS to be in the range of $24.70 to $24.95,
compared to the previous range of $23.74 to $24.24, while Adjusted
EPS is expected to be in a range of $18.50 to $18.75 versus the
previous range of $18.25 to $18.75. For comparison, FY 2020 GAAP
and Adjusted EPS guidance is detailed below along with GAAP and
Adjusted results for the year ended December 31, 2019 (FY
2019).
The company is revising its individual Medicare Advantage net
membership growth estimate to now anticipate growth of
approximately 375,000 members for FY 2020 compared to the previous
guidance growth range of 330,000 to 360,000 members. This
anticipated increase in 2020 represents year-over-year growth of
approximately 10 percent.
The company is reiterating its expectations for group Medicare
Advantage net membership gains for FY 2020, projecting an increase
of approximately 90,000 members year over year.
For its stand-alone PDP business, Humana now expects a net
membership decline of approximately 500,000 members for FY 2020,
compared to the previous estimate of 550,000 members.
Given the likelihood of significant variability of results by
financial statement line item (and related ratios), Humana
previously withdrew its additional FY 2020 detailed guidance points
that were initially provided as part of the company's fourth
quarter 2019 earnings release dated February 5, 2020.
Diluted earnings per common
share
FY 2020 Guidance
(f)
FY 2019 (g)
4Q 2020 Guidance
(h)
4Q 2019 (i)
GAAP
$24.70 to $24.95
$20.10
($2.55
)
$3.84
Amortization of identifiable
intangibles
~0.51
0.40
~0.15
0.10
Put/call valuation adjustments associated
with company's non-consolidating minority interest investments
0.37
(2.89
)
—
(1.67
)
Change in fair market value of
publicly-traded equity securities
(3.73
)
—
—
—
Receipt of commercial risk corridor
receivables previously written off, net
(3.35
)
—
—
—
Charges associated with workforce
optimization
—
0.26
—
0.01
Adjusted (non-GAAP) – FY 2020 and 4Q
2020 projected; FY 2019 and 4Q 2019 reported
$18.50 to $18.75
$17.87
($2.40
)
$2.28
2022 Preliminary Rate
Notice
On Friday, October 30, 2020, after the stock market closed, the
Centers for Medicare and Medicaid Services (CMS) issued its
preliminary 2022 Medicare Advantage and Part D payment rates and
proposed policy changes (collectively, the Advance Notice). CMS has
invited public comment on the Advance Notice before publishing
final rates on or before April 5, 2021 (the Final Notice), and
indicated that the Final Notice may be published early in light of
the challenges posed by the uncertainty associated with the
COVID-19 pandemic.
In the Advance Notice, CMS estimates Medicare Advantage plans
across the sector will, on average, experience a 2.82 percent
increase in benchmark funding based on proposals included therein.
As indicated by CMS, its estimate excludes the impact of
fee‐for‐service county rebasing/re-pricing since the related impact
is dependent upon finalization of certain data, which will be
available with the publication of the Final Notice.
Based on the company’s preliminary analysis using the same
factors CMS included in its estimate, the components of which are
detailed on CMS’ website, Humana anticipates the proposals in the
Advance Notice would result in a change generally in line with CMS’
estimate, with the exception of Humana's Medicare Star Ratings for
bonus year 2022, as more fully described below, that led the
company’s peers.
The company will be drawing upon its program expertise to
provide CMS formal commentary on the impact of the Advance Notice
and the related impact upon Medicare beneficiaries’ quality of care
and service to its members through the Medicare Advantage
program.
Star Quality Ratings
As previously disclosed, in October 2020, the Centers for
Medicare and Medicaid Services (CMS) published its updated Medicare
Star Ratings for bonus year 2022. Humana has 4.1 million members,
or approximately 92 percent of its Medicare Advantage membership as
of September 2020, enrolled in 15 contracts that received a 4-star
rating or above. In addition, Humana received a 5 out of 5-star
rating for its CarePlus Health Plans, Inc. contract in Florida,
which currently covers approximately 164,300 members, for the third
consecutive year and received a 4.5-star rating for three Medicare
Advantage contracts offered in 7 states, which cover approximately
796,000 members. Additionally, over 99 percent of retirees in
Humana's group Medicare Advantage plans remain in 4-star or above
contracts for bonus year 2022. Humana's Star Ratings continue to
reflect the company's focus on quality in both member experience
and clinical outcomes.
Detailed Press Release
Humana’s full earnings press release including the statistical
pages has been posted to the company’s Investor Relations site and
may be accessed at https://humana.gcs-web.com/ or via a current
report on Form 8-K filed by the company with the Securities and
Exchange Commission this morning (available at www.sec.gov or on
the company’s website).
Conference Call
Humana will host a conference call at 9:00 a.m. Eastern time
today to discuss its financial results for the quarter and the
company’s expectations for future earnings.
All parties interested in the company’s 3Q20 earnings conference
call are invited to dial 888-625-7430. No password is required. The
audio-only webcast of the 3Q20 earnings call may be accessed via
Humana’s Investor Relations page at humana.com. The company
suggests participants for both the conference call and those
listening via the web dial in or sign on at least 15 minutes in
advance of the call.
For those unable to participate in the live event, the archive
will be available in the Historical Webcasts and Presentations
section of the Investor Relations page at humana.com, approximately
two hours following the live webcast. Telephone replays will also
be available from approximately 12:15 p.m. Eastern time on November
3, 2020 until 10:59 p.m. Eastern time on January 3, 2021 and can be
accessed by dialing 855-859-2056 and providing the conference ID
#3879636.
Footnotes
(a) 3Q20 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $23 million pretax, or $0.13 per diluted common
share; GAAP measures affected in this release include consolidated
pretax, EPS, and segment earnings (for respective amortization
expense for the Retail and Group and Specialty segments).
- Put/call valuation adjustments of approximately $7 million, or
$0.03 per diluted common share, associated with Humana’s
non-consolidating minority interest investments. GAAP measures
affected in this release include consolidated pretax and EPS.
- Change in fair market value of publicly-traded equity
securities of $643 million, or $3.72 per diluted common share. GAAP
measures affected in this release include consolidated pretax, EPS,
and consolidated revenues. Humana adjusts for the market gains and
losses of its publicly-traded equity investments (primarily Oak
Street Health, Inc.) each period because while investments are
strategic decisions for the company, management's measure of
performance is primarily focused on operational results rather than
fair value of such investments. Also, management does not forecast
changes in fair value of its equity investments. Accordingly, the
company believes it is useful to adjust GAAP EPS for the market
gains and losses of publicly-traded equity securities.
- Net adjustment of $578 million, or $3.35 per diluted common
share, related to the receipt of unpaid risk corridor payments
associated with the losses incurred by the company under the ACA
business in 2014 to 2016 (previously written off). GAAP measures
affected in this release include consolidated pretax, EPS,
consolidated revenues, consolidated benefits expense ratio, and
consolidated operating cost ratio.
(b) 3Q19 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $17 million pretax, or $0.10 per diluted common
share; GAAP measures affected in this release include consolidated
pretax, EPS, and segment earnings (for respective amortization
expense for the Retail and Group and Specialty segments).
- Put/call valuation adjustments of approximately $82 million, or
$0.47 per diluted common share, associated with Humana’s
non-consolidating minority interest investments. GAAP measures
affected in this release include consolidated pretax and EPS.
- Expense associated with involuntary workforce reduction of
approximately $46 million pretax, or $0.26 per diluted common
share; GAAP measures affected in this release include consolidated
pretax, EPS, and consolidated operating cost ratio.
(c) YTD 2020 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $66 million pretax, or $0.38 per diluted common
share; GAAP measures affected in this release include consolidated
pretax, EPS and segment earnings (for respective amortization
expense for the Retail and Group and Specialty segments.)
- Put/call valuation adjustments of approximately $63 million, or
$0.37 per diluted common share, associated with Humana's
non-consolidating minority interest investments. GAAP measures
affected in this release include consolidated pretax and EPS.
- Change in fair market value of publicly-traded equity
securities of $643 million, or $3.73 per diluted common share. GAAP
measures affected in this release include consolidated pretax, EPS,
and consolidated revenues. Humana adjusts for the market gains and
losses of its publicly-traded equity investments (primarily Oak
Street Health, Inc.) each period because while investments are
strategic decisions for the company, management's measure of
performance is primarily focused on operational results rather than
fair value of such investments. Also, management does not forecast
changes in fair value of its equity investments. Accordingly, the
company believes it is useful to adjust GAAP EPS for the market
gains and losses of publicly-traded equity securities.
- Net adjustment of $578 million, or $3.35 per diluted common
share, related to the receipt of unpaid risk corridor payments
associated with the losses incurred by the company under the ACA
business in 2014 to 2016 (previously written off). GAAP measures
affected in this release include consolidated pretax, EPS,
consolidated revenues, consolidated benefits expense ratio, and
consolidated operating cost ratio.
(d) YTD 2019 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $53 million pretax, or $0.29 per diluted common
share; GAAP measures affected in this release include consolidated
pretax, EPS and segment earnings (for respective amortization
expense for the Retail and Group and Specialty segments.)
- Put/call valuation adjustments of approximately $217 million,
or $1.23 per diluted common share, associated with Humana's
non-consolidating minority interest investments. GAAP measures
affected in this release include consolidated pretax and EPS.
- Expense associated with involuntary workforce reduction of
approximately $46 million pretax, or $0.26 per diluted common
share; GAAP measures affected in this release include consolidated
pretax, EPS, and consolidated operating cost ratio.
(e) The Healthcare Services segment Adjusted EBITDA includes
GAAP segment earnings with adjustments to add back depreciation and
amortization expense, interest expense, and income taxes. The
Adjusted EBITDA includes results from all lines of business within
the segment. The Adjusted EBITDA also includes the impact of
Humana’s 40% minority interest in Kindred at Home and the strategic
partnership with Welsh, Carson, Anderson & Stowe (WCAS) to
develop and operate senior-focused, payor-agnostic, primary care
centers.
(f) FY 2020 Adjusted EPS projections
exclude the following:
- Amortization expense for identifiable intangibles of
approximately ~0.51 per diluted common share.
- Put/call valuation adjustments of $0.37 per diluted common
share related to Humana's non-consolidating minority interest
investments. FY20 GAAP EPS guidance excludes the impact of future
value changes of put/call options related to Humana’s
non-consolidating minority interest investments. The future value
change of these put/call options cannot be estimated.
- Change in fair market value of publicly-traded equity
securities of $3.73 per diluted common share. The future value of
these investments, their impact on GAAP EPS, and the related
non-GAAP adjustment will fluctuate on the public trading value of
the stock. The guidance set forth herein assumes no further change
in the fair value of these investments.
- Net adjustment of $3.35 per diluted common share related to the
receipt of unpaid risk corridor payments associated with the losses
incurred by the company under the ACA business in 2014 to 2016
(previously written off).
(g) FY 2019 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $70 million pretax, or $0.40 per diluted common
share.
- Put/call valuation adjustments of approximately $506 million,
or $2.89 per diluted common share, associated with Humana’s
non-consolidating minority interest investments.
- Expense associated with involuntary workforce reduction of
approximately $47 million pretax, or $0.26 per diluted common
share.
(h) 4Q 2020 Adjusted EPS projections
exclude the following:
- Amortization expense for identifiable intangibles of
approximately ~0.15 per diluted common share.
- 4Q 2020 GAAP EPS guidance excludes the impact of future value
changes of put/call options related to Humana’s non-consolidating
minority interest investments. The future value change of these
put/call options cannot be estimated.
- The future value of publicly-traded equity securities, their
impact on GAAP EPS, and the related non-GAAP adjustment will
fluctuate on the public trading value of the stock. The guidance
set forth herein assumes no further change in the fair value of
these investments.
(i) 4Q 2019 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $17 million pretax income, or $0.10 per diluted
common share.
- Put/call valuation adjustments of approximately $289 million,
or $1.67 per diluted common share, associated with Humana’s
non-consolidating minority interest investments.
- Expense associated with involuntary workforce reduction of
approximately $1 million pretax, or $0.01 per diluted common
share.
Cautionary Statement
This news release includes forward-looking
statements regarding Humana within the meaning of the Private
Securities Litigation Reform Act of 1995. When used in investor
presentations, press releases, Securities and Exchange Commission
(SEC) filings, and in oral statements made by or with the approval
of one of Humana’s executive officers, the words or phrases like
“expects,” “believes,” “anticipates,” “intends,” “likely will
result,” “estimates,” “projects” or variations of such words and
similar expressions are intended to identify such forward-looking
statements.
These forward-looking statements are not
guarantees of future performance and are subject to risks,
uncertainties, and assumptions, including, among other things,
information set forth in the “Risk Factors” section of the
company’s SEC filings, a summary of which includes but is not
limited to the following:
- If Humana does not design and price its products properly and
competitively, if the premiums Humana receives are insufficient to
cover the cost of healthcare services delivered to its members, if
the company is unable to implement clinical initiatives to provide
a better healthcare experience for its members, lower costs and
appropriately document the risk profile of its members, or if its
estimates of benefits expense are inadequate, Humana’s
profitability could be materially adversely affected. Humana
estimates the costs of its benefit expense payments, and designs
and prices its products accordingly, using actuarial methods and
assumptions based upon, among other relevant factors, claim payment
patterns, medical cost inflation, and historical developments such
as claim inventory levels and claim receipt patterns. The company
continually reviews estimates of future payments relating to
benefit expenses for services incurred in the current and prior
periods and makes necessary adjustments to its reserves, including
premium deficiency reserves, where appropriate. These estimates,
however, involve extensive judgment, and have considerable inherent
variability because they are extremely sensitive to changes in
claim payment patterns and medical cost trends, so any reserves the
company may establish, including premium deficiency reserves, may
be insufficient.
- If Humana fails to effectively implement its operational and
strategic initiatives, particularly its Medicare initiatives and
state-based contract strategy, the company’s business may be
materially adversely affected, which is of particular importance
given the concentration of the company’s revenues in these
products. In addition, there can be no assurances that the company
will be successful in maintaining or improving its Star ratings in
future years.
- If Humana fails to properly maintain the integrity of its data,
to strategically implement new information systems, to protect
Humana’s proprietary rights to its systems, or to defend against
cyber-security attacks or prevent other privacy or data security
incidents that result in security breaches that disrupt our
operations or in the unintended dissemination of sensitive personal
information or proprietary or confidential information, the
company’s business may be materially adversely affected.
- Humana is involved in various legal actions, or disputes that
could lead to legal actions (such as, among other things, provider
contract disputes and qui tam litigation brought by individuals on
behalf of the government), governmental and internal
investigations, and routine internal review of business processes
any of which, if resolved unfavorably to the company, could result
in substantial monetary damages or changes in its business
practices. Increased litigation and negative publicity could also
increase the company’s cost of doing business.
- As a government contractor, Humana is exposed to risks that may
materially adversely affect its business or its willingness or
ability to participate in government healthcare programs including,
among other things, loss of material government contracts,
governmental audits and investigations, potential inadequacy of
government determined payment rates, potential restrictions on
profitability, including by comparison of profitability of the
company’s Medicare Advantage business to non-Medicare Advantage
business, or other changes in the governmental programs in which
Humana participates. Changes to the risk-adjustment model utilized
by CMS to adjust premiums paid to Medicare Advantage, or MA, plans
according to the health status of covered members, including
proposed changes to the methodology used by CMS for risk adjustment
data validation audits that fail to address adequately the
statutory requirement of actuarial equivalence, if implemented,
could have a material adverse effect on our operating results,
financial position and cash flows.
- Humana's business activities are subject to substantial
government regulation. New laws or regulations, or legislative,
judicial, or regulatory changes in existing laws or regulations or
their manner of application could increase the company's cost of
doing business and have a material adverse effect on Humana’s
results of operations (including restricting revenue, enrollment
and premium growth in certain products and market segments,
restricting the company’s ability to expand into new markets,
increasing the company’s medical and operating costs by, among
other things, requiring a minimum benefit ratio on insured
products, lowering the company’s Medicare payment rates and
increasing the company’s expenses associated with a non-deductible
health insurance industry fee and other assessments); the company’s
financial position (including the company’s ability to maintain the
value of its goodwill); and the company’s cash flows.
- Humana’s failure to manage acquisitions, divestitures and other
significant transactions successfully may have a material adverse
effect on the company’s results of operations, financial position,
and cash flows.
- If Humana fails to develop and maintain satisfactory
relationships with the providers of care to its members, the
company’s business may be adversely affected.
- Humana’s pharmacy business is highly competitive and subjects
it to regulations in addition to those the company faces with its
core health benefits businesses.
- Changes in the prescription drug industry pricing benchmarks
may adversely affect Humana’s financial performance.
- If Humana does not continue to earn and retain purchase
discounts and volume rebates from pharmaceutical manufacturers at
current levels, Humana’s gross margins may decline.
- Humana’s ability to obtain funds from certain of its licensed
subsidiaries is restricted by state insurance regulations.
- Downgrades in Humana’s debt ratings, should they occur, may
adversely affect its business, results of operations, and financial
condition.
- The securities and credit markets may experience volatility and
disruption, which may adversely affect Humana’s business.
- The spread of, and response to, the novel coronavirus, or
COVID-19, underscores certain risks Humana faces, including those
discussed above, and the rapid development and fluidity of this
situation precludes any prediction as to the ultimate adverse
impact to Humana of COVID-19.
In December 2019, a novel strain of
coronavirus (COVID-19) emerged which was declared a pandemic by the
World Health Organization on March 11, 2020, and has now spread
globally including throughout the United States.
Governmental and non-governmental
organizations may not effectively combat the spread and severity of
COVID-19, increasing the potential for harm for Humana’s members.
If the spread of COVID-19 is not contained, the premiums the
company charges may prove to be insufficient to cover the cost of
health care services delivered to its members, which may increase
significantly as a result of higher utilization rates of medical
facilities and services and other increases in associated hospital
and pharmaceutical costs. Over time, Humana may also experience
increased costs or decreased revenues if, as a result of the
company’s members being unable to see their providers due to
actions taken to mitigate the spread of COVID-19, Humana is unable
to implement clinical initiatives to manage health care costs and
chronic conditions of its members, and appropriately document their
risk profiles. In addition, Humana is offering its members expanded
benefit coverage, such as waiving out of pocket costs for COVID-19
diagnostic testing and treatment, certain additional coverages have
been mandated by governmental action, and Humana is taking actions
designed to help provide financial and administrative relief for
the health care provider community. Such measures and any further
steps taken by Humana, or governmental action, to continue to
respond to and address the ongoing impact of COVID-19, including
further expansion or modification of the services delivered to its
members, the adoption or modification of regulatory requirements
associated with those services and the costs and challenges
associated with ensuring timely compliance with such requirements,
to provide further relief for the health care provider community,
or in connection with the relaxation of stay-at-home and physical
distancing orders and other restrictions on movement and economic
activity, including the potential for widespread testing and
therapeutic treatments and a vaccine, once available, as a
component of lifting these measures, could adversely impact the
company’s profitability.
The spread and impact of COVID-19, or actions
taken to mitigate this spread, could have material and adverse
effects on Humana’s ability to operate effectively, including as a
result of the complete or partial closure of facilities or labor
shortages. Disruptions in public and private infrastructure,
including communications, availability of in-person sales and
marketing channels, financial services and supply chains, could
materially and adversely disrupt the company’s normal business
operations. Humana has transitioned a significant subset of its
employee population to a remote work environment in an effort to
mitigate the spread of COVID-19, as have a number of the company’s
third-party service providers, which may exacerbate certain risks
to Humana’s business, including an increased demand for information
technology resources, increased risk of phishing and other
cybersecurity attacks, and increased risk of unauthorized
dissemination of sensitive personal information or proprietary or
confidential information about the company or its members or other
third-parties. The outbreak of COVID-19 has severely impacted
global economic activity, including the businesses of some of
Humana’s commercial customers, and caused significant volatility
and negative pressure in the financial markets. In addition to
disrupting Humana’s operations, these developments may adversely
affect the timing of commercial customer premium collections and
corresponding claim payments, the value of the company’s investment
portfolio, or future liquidity needs.
The rapid development and fluidity of this
situation precludes any prediction as to the ultimate adverse
impact to Humana of COVID-19. Humana is continuing to monitor the
spread of COVID-19, changes to the company’s benefit coverages, the
ongoing costs and business impacts of dealing with COVID-19,
including the potential costs and impacts associated with lifting
or reimposing restrictions on movement and economic activity and
related risks. The magnitude and duration of the pandemic and its
impact on Humana’s business, results of operations, financial
position, and cash flows is uncertain as this continues to evolve
globally, but such impacts could be material to the company’s
business, results of operations, financial position and cash
flows.
In making forward-looking statements, Humana is not undertaking
to address or update them in future filings or communications
regarding its business or results. In light of these risks,
uncertainties, and assumptions, the forward-looking events
discussed herein may or may not occur. There also may be other
risks that the company is unable to predict at this time. Any of
these risks and uncertainties may cause actual results to differ
materially from the results discussed in the forward-looking
statements.
Humana advises investors to read the following documents as
filed by the company with the SEC for further discussion both of
the risks it faces and its historical performance:
- Form 10-K for the year ended December 31, 2019;
- Form 10-Q for the quarter ended March 31, 2020; June 30, 2020;
and
- Form 8-Ks filed during 2020.
About Humana
Humana Inc. (NYSE: HUM) is committed to helping our millions of
medical and specialty members achieve their best health. Our
successful history in care delivery and health plan administration
is helping us create a new kind of integrated care with the power
to improve health and well-being and lower costs. Our efforts are
leading to a better quality of life for people with Medicare,
families, individuals, military service personnel, and communities
at large.
To accomplish that, we support physicians and other health care
professionals as they work to deliver the right care in the right
place for their patients, our members. Our range of clinical
capabilities, resources and tools – such as in-home care,
behavioral health, pharmacy services, data analytics and wellness
solutions – combine to produce a simplified experience that makes
health care easier to navigate and more effective.
More information regarding Humana is available to investors via
the Investor Relations page of the company’s website at humana.com,
including copies of:
- Annual reports to stockholders
- Securities and Exchange Commission filings
- Most recent investor conference presentations
- Quarterly earnings news releases and conference calls
- Calendar of events
- Corporate Governance information
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201103005124/en/
Amy Smith Humana Investor Relations (502) 580-2811 e-mail:
Amysmith@humana.com
Kelley Murphy Humana Corporate Communications (502) 224-1755
e-mail: Kmurphy26@humana.com
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