COVID costs push Humana into the red in Q4, losing $274M

A rise in COVID-19 costs contributed to a net loss of $274 million at Humana during the fourth quarter, down from the $512 million booked in the same period in 2019.

At the same time, the insurer’s revenue and earnings experienced substantial increases for the full year, driven by growth in Humana’s pharmacy benefit management business and Medicare Advantage customers.

Humana’s net loss during the fourth quarter folllowed a surge in coronavirus cases among members and marketing costs related to Medicare Advantage annual election period. The losses came despite the fact that the the Louisville, Ken.-based insurer reported a 17% bump in revenues to $19.1 billion for the quarter, up from the $16.3 billion reported during the same time the year before.

In the full 2020, Humana reported $3.4 billion in earnings, up 24% compared with the $2.7 billion reported in 2019. Revenue for 2020 reached $77.2 billion, up nearly 19% year-over-year from $64.9 billion.

CEO Bruce Broussard noted that the reinstatement of the health insurance industry fee last year accounted for a $1.2 billion cut out of the insurer’s bottom line “and disproportionately impacted our business relative to competitors.” The ACA created the tax, known as the health insurance industry fee, to fund implementation of the ACA’s marketplace exchanges.

Broussard pointed to growth in the company’s pharmacy benefit manager as a sign of relief. Humana Pharmacy Solutions issued 478 million scripts in 2020, up 5% year-over-year. Broussard added that 37% of medications were delivered to consumers through the company’s mail-order program.

“The pandemic helped educate individuals of the benefit of mail-order,” Broussard said, adding that he expected the trend to continue in 2021.

Medicare Advantage also proved to a bright spot for Humana, with membership reaching 4.6 million people by the end of the year, up 11% from 2019. Enrollment in the company’s Medicare Dual Special Needs Plans rose 41% year-over-year.

In 2021, Humana expects to add up to 475,000 new Medicare Advantage members, growing the business by 12% year-over-year.

Going forward, Humana expects the uncertainty around the coronavirus to continue to impact its operations. Humana expects costs related to the pandemic to reach up to $925 million for the year, although a lack of healthcare utilization among members should offset additional coronavirus payments.

A decline in Medicare patient visits to the doctor during the final months of 2020 is making it hard for the insurer to price these visits appropriately because physicians didn’t include risk codes that Humana usually sees for doctor appointments. This trend continued into January, with non-COVID-related utilization among Medicare members dropping 20%.


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