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Humana May Change Benefits, Exit Markes on Medicare Cuts

Humana Inc. (HUM), the fifth-biggest U.S. health insurer, said government cuts in Medicare may lead the company to change benefits and exit markets.

Rate cuts for 2015 may reach 7 percent, following a similar reduction for this year, Chief Executive Officer Bruce Broussard said today on a conference call with analysts. Humana, based in Louisville, Kentucky, fell 1.8 percent to $95.72 at the close in New York.

Medicare Advantage, insurers’ private version of the U.S. government program for the elderly, had been a key source of growth for the industry. The companies’ reimbursements are being scaled back to help pay for the insurance expansion under the Patient Protection and Affordable Care Act, the U.S. health-care overhaul known as Obamacare.

“We can’t overcome all of the cumulative effects” of the reductions, Broussard said. The cuts are causing the company to weigh “benefit changes and exiting markets,” he said.

UnitedHealth Group Inc. (UNH), the biggest U.S. health insurer, also estimated rate cuts may reach 7 percent. The cuts could be “extraordinarily disruptive,” Chief Executive Officer Stephen Hemsley said on Jan. 16, sending that company’s shares down the most in three months.

Humana reaffirmed its 2014 earnings forecast of $7.25 to $7.75 a share in a statement today, citing better-than-expected Medicare membership growth. The company also said it received 202,000 for health insurance through the Obamacare exchanges from Oct. 1, when they opened, and Jan. 31.

To contact the reporter on this story: Caroline Chen in New York at cchen509@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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