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Is Humana Likely to Take Another Financial Hit?

Analysis  |  By Amanda Norris  
   February 06, 2024

This time, CMS is to blame for upsetting Humana's funding expectations for 2025.

CMS recently released its proposed Medicare Advantage (MA) payment rules for 2025—and it includes a 0.2% decrease in average benchmark payment rates for next year.

One payer quick to speak out on the decrease? Humana.

Coming on the heels of a huge fourth quarter loss, Humana says if CMS’ rate changes are finalized as proposed, the MA changes will lower Humana’s benchmark funding by around 160 basis points.

Humana, one of the major players in the MA program, analyzed the proposed rule and found that the changes will lower its funding even though the company had expected rates to stay the same.

The issue revolves around the effective growth rate restatements, which Humana didn't anticipate considering the industry's higher medical cost trends, according to its filing with the SEC.

While this rate decrease would be bad news for Humana, CMS says payers are expected to still make $16 billion more next year compared to this year. Even still, it’s likely payers will lobby for a higher payment rate before the final notice is released in April.

Although MA has historically been lucrative for insurers, recent regulatory changes and rising costs due to increased medical care for seniors are putting the offering at risk.

In fact, while MA is still growing, it is showing signs of becoming less profitable for payers, a report by Moody's said.

We may see an uptick in MA payers raising premiums, reducing benefits, and even considering leaving certain markets to improve their margins—changes that would make providers even less likely to keep their MA contracts.

Amanda Norris is the Associate Content Manager of Finance, Payer, Revenue Cycle, and Strategy for HealthLeaders.


KEY TAKEAWAYS

Coming on the heels of a huge fourth quarter loss, Humana may have to lower its benchmark funding by around 160 basis points.

Although MA has historically been lucrative for insurers, recent regulatory changes and rising costs are putting the offering at risk.

We may see an uptick in MA payers raising premiums, reducing benefits, and even considering leaving certain markets to improve margins—changes that would make providers even less likely to keep their MA contracts.


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