- Reports 3Q21 earnings per diluted common share of $11.84 on a
GAAP basis, $4.83 on an Adjusted basis; reports YTD 2021 EPS of
$22.77 on a GAAP basis, $19.40 on an Adjusted basis
- Revises FY 2021 EPS guidance to approximately $23.67 on a GAAP
basis, or approximately $20.50 on an Adjusted basis, to reflect a
net COVID headwind, while confirming $21.50 as the baseline for
2022 Adjusted EPS growth
- Achieves 97 percent, or 4.8 million of the company's Medicare
Advantage members currently enrolled in 4-Star and above contracts
for 2022, including over 2 million members in 4.5 Star and 5-Star
contracts
- Updates FY 2021 expected individual Medicare Advantage
membership growth to 450,000 members, reflecting year-over-year
growth of 11 percent
Humana Inc. (NYSE: HUM) today reported consolidated pretax
income and diluted earnings per common share for the quarter ended
September 30, 2021 (3Q21) versus the quarter ended September 30,
2020 (3Q20) and for the nine months ended September 30, 2021 (YTD
2021) versus the nine months ended September 30, 2020 (YTD 2020) as
noted in the tables below.
Consolidated income before income taxes
and equity in net earnings (pretax income) In millions
3Q21 (a)
3Q20 (b)
YTD 2021 (c)
YTD 2020 (d)
Generally Accepted Accounting
Principles (GAAP)
$1,636
$1,755
$3,414
$5,058
Amortization associated with identifiable
intangibles
17
23
47
66
Gain on Kindred at Home equity method
investment
(1,129
)
—
(1,129
)
—
Put/call valuation adjustments associated
with company's non-consolidating minority interest investments
33
(7
)
567
63
Transaction and integration costs
associated with Kindred at Home acquisition
71
—
93
—
Change in fair market value of
publicly-traded equity securities
174
(643
)
197
(643
)
Receipt of commercial risk corridor
receivables previously written off, net
—
(578
)
—
(578
)
Adjusted (non-GAAP)
$802
$550
$3,189
$3,966
Diluted earnings per common share
(EPS)
3Q21 (a)
3Q20 (b)
YTD 2021 (c)
YTD 2020 (d)
GAAP
$11.84
$10.05
$22.77
$27.37
Amortization associated with identifiable
intangibles
0.10
0.13
0.28
0.38
Gain on Kindred at Home equity method
investment
(8.74
)
—
(8.73
)
—
Put/call valuation adjustments associated
with company's non-consolidating minority interest investments
0.20
(0.03
)
3.38
0.37
Transaction and integration costs
associated with Kindred at Home acquisition
0.39
—
0.52
—
Change in fair market value of
publicly-traded equity securities
1.04
(3.72
)
1.18
(3.73
)
Receipt of commercial risk corridor
receivables previously written off, net
—
(3.35
)
—
(3.35
)
Adjusted (non-GAAP)
$4.83
$3.08
$19.40
$21.04
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.
“Despite pandemic-related impacts, Humana had a strong third
quarter, which we attribute largely to the strength of our Medicare
Advantage (MA) offerings, highlighted by our individual MA
membership expected to grow 11 percent year-over-year, ahead of
industry expectations,” said Bruce D. Broussard, Humana’s President
and Chief Executive Officer. "Given a highly competitive market,
this type of growth is difficult, but we believe our success speaks
to the value that our MA plans deliver to Medicare beneficiaries;
our industry leading customer experience that has been recognized
from notable organizations such as Forrester, J.D. Power, and USAA;
and our focus on quality as evidenced by our recently announced
results in CMS’s Five-Star Quality Rating System where we continue
to be a leader among our peers, with 4.8 million, or 97 percent, of
our MA members enrolled in plans rated 4-stars or higher. Looking
ahead to 2022, we’re taking a steady and balanced approach to
ensure we can maintain years-long stability of benefits for our
customers, while also continuing to navigate pandemic uncertainties
and the return to industry norms."
Summary of Quarterly
Results
3Q21 and YTD 2021 results reflect the strength of Humana's
underlying core operations, combined with the continued impact of
the COVID-19 pandemic. Year-over-year comparisons for GAAP and
Adjusted consolidated pretax income and EPS results were impacted
by the following factors:
- the consolidation of Kindred at Home operations upon completion
of the acquisition of the remaining 60 percent interest in Kindred
at Home in August 2021; and
- the significant impact of the deferral of non-essential care in
2020, primarily in the second quarter of 2020, net of COVID-19
testing and treatment costs and the company’s pandemic relief
efforts in YTD 2020.
The year-over-year changes in GAAP and Adjusted EPS for 3Q21 and
YTD 2021 further reflect the beneficial tax impact of the
termination of the health insurance industry fee (HIF) in 2021 and
a lower number of shares used to compute EPS, primarily reflective
of share repurchases in 2020.
In addition, year-over-year comparisons in GAAP consolidated
pretax income and EPS results, on both a quarter and YTD basis,
were impacted by the following:
- $1.13 billion gain associated with the company's previous
minority ownership in Kindred at Home,
- put/call valuation adjustments associated with the company's
non-consolidating minority interest investments (including the
portion related to Kindred at Home for the period in 2021 prior to
the transaction closing when the company held a minority ownership
interest),
- the change in the fair market value of publicly-traded equity
securities (primarily Oak Street Health, Inc.),
- transaction and integration costs associated with the Kindred
at Home acquisition, and
- the 3Q20 receipt of unpaid risk corridor payments that were
previously written off.
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 3Q21 to 3Q20 and YTD 2021 and YTD 2020.
Humana Inc. Summary of Quarterly
Results (dollars in millions, except per share amounts)
3Q21 (a)
3Q20 (b)
YTD 2021 (c)
YTD 2020 (d)
Consolidated results:
Revenues - GAAP
$20,697
$20,075
$62,010
$58,093
Revenues - Adjusted
$20,871
$18,823
$62,207
$56,841
Pretax income - GAAP
$1,636
$1,755
$3,414
$5,058
Pretax income - Adjusted
$802
$550
$3,189
$3,966
Diluted EPS - GAAP
$11.84
$10.05
$22.77
$27.37
Diluted EPS - Adjusted
$4.83
$3.08
$19.40
$21.04
Benefits expense ratio - GAAP
87.1
%
82.6
%
86.3
%
81.4
%
Benefits expense ratio - Adjusted
87.1
%
85.3
%
86.3
%
82.3
%
Operating cost ratio - GAAP
12.6
%
13.0
%
10.9
%
12.2
%
Operating cost ratio - Adjusted
12.2
%
13.2
%
10.8
%
12.3
%
Operating cash flows - GAAP
$2,835
$1,815
$2,358
$5,356
Parent company cash and short term
investments
$1,246
$2,422
Debt-to-total capitalization
43.0
%
33.0
%
Retail segment results:
Revenues - GAAP
$18,440
$16,741
$55,633
$50,464
Benefits expense ratio - GAAP
88.1
%
85.1
%
87.6
%
83.3
%
Operating cost ratio - GAAP
9.1
%
11.2
%
8.4
%
10.0
%
Segment earnings - GAAP
$456
$553
$2,086
$3,227
Segment earnings - Adjusted
$460
$557
$2,098
$3,239
Group and Specialty segment
results:
Revenues - GAAP
$1,695
$1,794
$5,150
$5,494
Benefits expense ratio - GAAP
86.4
%
93.0
%
81.2
%
79.6
%
Operating cost ratio - GAAP
24.9
%
25.2
%
23.9
%
24.0
%
Segment (loss) earnings - GAAP
($28)
($160)
$186
$232
Segment (loss) earnings - Adjusted
($27)
($159)
$189
$235
Healthcare Services segment
results:
Revenues - GAAP
$8,038
$7,131
$22,760
$21,157
Operating cost ratio - GAAP
95.0
%
96.4
%
95.6
%
95.8
%
Segment earnings - GAAP
$373
$249
$953
$816
Adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA) (e)
$415
$327
$1,132
$1,036
2021 Earnings Guidance
Humana is revising its GAAP EPS guidance range for the year
ending December 31, 2021 (FY 2021) to approximately $23.67 from the
previous range of $24.97 to $25.47. Humana is also revising its FY
2021 Adjusted EPS guidance to approximately $20.50 from the
previous guidance range of $21.25 to $21.75. The current FY 2021
EPS guidance reflects the company’s updated view of utilization for
the fourth quarter of 2021. Please see below for the company’s
previous guidance commentary for reference, as well as detail of
utilization assumptions included in the current FY 2021
guidance.
2021
Utilization
(as a percent of Estimated FY 2021
Baseline Medicare Advantage Claims Expense)
Second Half of 2021
(2H21)
Projection as of
September 2021
COVID Utilization
3.0%
Depression in non-COVID Utilization
(5.5)%
Total Medicare Advantage
Utilization
(COVID and non-COVID)
(2.5)%
3Q21
4Q21
2H21
As of November 3,
2021
(3Q21 actual;
4Q21 projected)
COVID Utilization
6.7
%
3.0
%
4.9
%
Depression in non-COVID Utilization
(7.7)
%
(4.0)
%
(5.9)
%
Total Medicare Advantage
Utilization
(COVID and non-COVID)
(1.0)
%
(1.0)
%
(1.0)
%
Previous Commentary:
In Humana’s second quarter earnings release dated July 28, 2021,
the company explained that FY 2021 guidance assumed non-COVID
Medicare Advantage utilization would run 2.5 percent below baseline
in the second half of the year, with a further assumption of
minimal COVID testing and treatment costs for the same period.
In September 2021, as a result of the surge in COVID cases due
to the Delta variant, Humana updated its commentary on FY 2021
Adjusted EPS guidance to indicate it expected non-COVID Medicare
Advantage utilization to be 5.5 percent below baseline in the back
of the year, while being partially offset by 3 percent of COVID
costs, therefore, again assuming total utilization would be 2.5
percent below baseline in the second half of 2021.
November 3, 2021 Update:
As noted in the table above, during 3Q21 COVID costs were higher
than previously expected, as the Delta variant resulted in
hospitalization levels on par with what the company experienced in
January of 2021 despite over 80 percent of its Medicare Advantage
members believed to be vaccinated. Non-COVID Medicare Advantage
utilization was lower than previously anticipated, and while this
reduction fully offset the higher than expected COVID costs,
resulting in total Medicare Advantage utilization running 1 percent
below the company's baseline estimates, this net deduction was 150
basis points less than the company's previous expectations that
total Medicare Advantage utilization would run 2.5 percent below
its baseline estimates for the second half of 2021. However, the
company experienced higher than anticipated favorable current
period medical claims reserve development and other operating
outperformance in 3Q21 contributing to results that were slightly
favorable to consensus expectations.
The company is updating its FY 2021 EPS guidance to take a more
conservative posture going into the final months of 2021, now
anticipating total Medicare Advantage utilization, net of COVID
costs, will run approximately 1 percent below baseline in the
fourth quarter (4Q21), consistent with its 3Q21 experience. This
guidance does not assume the higher levels of favorable current
period development seen in 3Q21 will continue.
Notably, as the company has consistently shared throughout the
year, the midpoint of its original guidance range of $21.50 remains
the correct baseline for 2022 Adjusted EPS growth given its 2022
pricing assumptions.
Humana GAAP and Adjusted results for FY 2020 are shown below for
comparison.
Diluted earnings per common
share
FY 2021
Guidance (f)
FY 2020 (g)
GAAP
~$23.67
$25.31
Amortization of identifiable
intangibles
0.39
0.51
Gain on Kindred at Home equity method
investment
(8.73
)
—
Put/call valuation adjustments associated
with company's non-consolidating minority interest investments
3.38
0.60
Transaction and integration costs
associated with the Kindred at Home acquisition
0.61
—
Change in fair market value of
publicly-traded equity securities
1.18
(4.32
)
Receipt of commercial risk corridor
receivables previously written off, net
—
(3.35
)
Adjusted (non-GAAP) – FY 2021
projected; FY 2020 reported
~$20.50
$18.75
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 3Q21 earnings conference
call are invited to dial 888-625-7430. No password is required. The
audio-only webcast of the 3Q21 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, 2021 until 10:59 p.m. Eastern time on January 3, 2022 and can be
accessed by dialing 855-859-2056 and providing the conference ID
#7294015.
Footnotes
(a) 3Q21 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).
- Gain associated with Kindred at Home equity method investment
of approximately $1,129 million pretax, or $8.74 per diluted common
share; the gain was recorded upon closing of the Kindred at Home
transaction in August 2021; GAAP measures affected in this release
include consolidated pretax and EPS.
- Put/call valuation adjustments of approximately $33 million
pretax, or $0.20 per diluted common share, associated with Humana’s
non-consolidating minority interest investments. GAAP measures
affected in this release include consolidated pretax and EPS.
- Transaction and integration costs associated with Kindred at
Home acquisition of approximately $71 million pretax, or $0.39 per
diluted common share; GAAP measure affected in this release include
consolidated pretax, EPS, and the consolidated operating cost
ratio.
- Change in fair market value of publicly-traded equity
securities of $174 million pretax, or $1.04 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.
(b) 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
pretax, 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 pretax, 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 pretax, 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.
(c) YTD 2021 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $47 million pretax, or $0.28 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).
- Gain associated with Kindred at Home equity method investment
of approximately $1,129 million pretax, or $8.73 per diluted common
share; the gain was recorded upon closing of the Kindred at Home
transaction in August 2021. GAAP measures affected in this release
include consolidated pretax and EPS.
- Put/call valuation adjustments of approximately $567 million
pretax, or $3.38 per diluted common share, associated with Humana’s
non-consolidating minority interest investments, including the
impact of the termination of the put/call agreement related to
Kindred at Home as a result of the transaction announced on April
27, 2021. GAAP measures affected in this release include
consolidated pretax and EPS.
- Transaction and integration costs associated with Kindred at
Home acquisition of approximately $93 million or $0.52 per diluted
common share; GAAP measure affected in this release include
consolidated pretax, EPS, and the consolidated operating cost
ratio.
- Change in fair market value of publicly-traded equity
securities of $197 million pretax, or $1.18 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.
(d) 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
pretax, 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 pretax, 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 pretax, 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.
(e) The Healthcare Services segment Adjusted earnings before
interest, taxes, depreciation and amortization (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 minority interest related to the strategic
partnership with Welsh, Carson, Anderson & Stowe (WCAS) to
develop and operate senior-focused, payor-agnostic, primary care
centers. Prior periods, as well as a portion of 3Q21, reflect the
impact of Humana's previous 40 percent minority interest in Kindred
at Home. In August 2021, Humana completed the acquisition of the
remaining 60 percent ownership of Kindred at Home and accordingly,
now consolidates its results.
(f) FY 2021 Adjusted EPS projections
exclude the following:
- Amortization expense for identifiable intangibles of $0.39 per
diluted common share.
- Gain associated with Kindred at Home equity method investment
of approximately $8.73 per diluted common share; the gain was
recorded upon closing of the Kindred at Home transaction in August
2021.
- Put/call valuation adjustments of $3.38 per diluted common
share related to Humana’s non-consolidating minority interest
investments, including the impact of the termination of the
put/call agreement related to Kindred at Home as a result of the
transaction announced on April 27, 2021. FY 2021 GAAP EPS guidance
excludes the impact of future value changes of these put/call
options as the future value changes cannot be estimated.
- Estimated transaction and integration costs associated with the
Kindred at Home acquisition of approximately $0.61 per diluted
common share.
- Change in the fair market value of equity securities of $1.18
per diluted common share. 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.
(g) FY 2020 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of $0.51 per
diluted common share.
- Put/call valuation adjustments of $0.60 per diluted common
share associated with Humana's non-consolidating minority interest
investments.
- Change in fair market value of publicly-traded equity
securities of $4.32 per diluted common share.
- 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 from 2014 to
2016 (previously written off).
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
involve extensive judgment, and have considerable inherent
variability because they are extremely sensitive to changes in
claim payment patterns and medical cost trends. Accordingly,
Humana's 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 maintain existing or 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; delays, reductions,
suspensions, or cancellations of government funding resulting from
a delay by Congress in raising the federal government's debt
ceiling; 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 and supply chain risks 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.
- 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 ongoing, heightened uncertainty created by
the pandemic precludes any prediction as to the ultimate adverse
impact to Humana of COVID-19.
To the extent that 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. Humana may also
experience increased costs or decreased revenues if, as a result of
the company’s members being unable or unwilling 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, and
has been mandated by legislative and regulatory action (including
the Families First Act and CARES Act) to provide, certain expanded
benefit coverage to its members, such as waiving out of pocket
costs for COVID-19 testing and treatment. Humana is also 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 the distribution
and administration of COVID-19 vaccines, 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 ongoing, heightened uncertainty created by the pandemic
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, and 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, the
timing and degree in resumption of demand for deferred healthcare
services, the pace of administration of COVID-19 vaccines and the
effectiveness of those vaccines, 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, 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, 2020;
- Form 10-Q for the quarter ended March 31, 2021; June 30, 2021;
and
- Form 8-Ks filed during 2021.
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/20211103005356/en/
Lisa Stoner Humana Investor Relations (502) 580-2652 e-mail:
LStamper@humana.com
Mark Taylor Humana Corporate Communications (317) 753-0345
e-mail: MTaylor108@humana.com
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