(Reuters) -Humana beat quarterly profit estimates on Wednesday on strong sales and lower-than-expected administrative expenses, but withdrew its already downscaled 2025 profit forecast, citing disappointing government Medicare reimbursement rates.
The health insurer, which primarily provides government-backed insurance plans including Medicare Advantage, has been facing multiple challenges.
Humana (NYSE:) had already warned of a potential hit to profits this year and next from increased demand for medical procedures, especially among older adults who are returning for non-urgent surgeries they had delayed during the pandemic.
The company is now also fearing increased expenses after the government’s final notice on 2025 Medicare reimbursement rates that are less than what insurers expected.
Humana withdrew its 2025 profit forecast, which it had slashed to $22 and $26 per share from $37 in January, citing more uncertainties.
It said on Wednesday it would provide more specific guidance once it has better clarity.
The lack of specific outlook adds “uncertainty around the trajectory and timing of the potential turnaround at Humana for investors,” Morningstar analyst Julie Utterback said.
The company also saw a jump in its medical benefit ratio – percentage of premiums spent on medical care – as it took a more conservative approach towards reserves for medical claims following disruptions caused by a recent hack at UnitedHealth (NYSE:) tech unit Change Healthcare (NASDAQ:).
The company recorded a ratio of 88.9% in the first quarter, higher than 85.5% a year earlier as well as above analysts’ expectation of 88.45%, according to LSEG data.
remove ads
.
Shares of the company, however, rose 3.2% in premarket trading following Humana’s profit beat and raised 2024 individual Medicare Advantage growth target, by 50,000 members.
On an adjusted basis, Humana reported a profit of $7.23 per share in the reported quarter, higher than the average analyst estimate of $6.12.
