Humana is bullish on future growth in Medicare Advantage (MA), its main line of business, in 2023 to bounce back from lackluster performance this year.
The insurer also raised its profit outlook for 2022, sending its shares up some 8% since the news Thursday.
The company projected it will grow its adjusted profits at a 14% annual rate over the next three years, executives told investors Thursday.
“We are committed to growth greater than the industry. We have the capabilities. We have the leading positioning in the marketplace. We have a brand so we know we can do it,” Humana CEO Bruce Broussard told investors during the company’s three-hour investor day presentation.
Humana’s growth in MA fell short of expectations in 2022, raising concerns that the company was losing ground in the highly attractive market.
In early January, Humana submitted a filing with the Securities and Exchange Commission that cut the outlook for membership growth from between 325,000 and 375,000 new members to between 150,000 and 200,000 new members. The insurer said it added 130,000 members during open enrollment.
The move to slash its MA enrollment outlook put Humana under Wall Street’s microscope. Its stock tumbled, and questions about the market have been posed to competitors at the J.P. Morgan Healthcare Conference as well as on earnings calls.
Humana has historically outpaced industry growth in the individual MA market, executives said. Between 2017 and 2021, Humana’s MA business grew 11.4%. That growth slowed to 10.5% when accounting for 2022.
Humana’s total MA enrollment rose 5.2% to 5.1 million by the end of the first quarter. That membership includes 4.5 million enrolled in individual MA plans.
Humana executives said Thursday the company was committed to significantly improving its Medicare growth in 2023 with plans to match or exceed the industry growth rate by 2024. Key to these efforts to revive its Medicare business will be the company’s $1 billion value creation initiative.
“With the investments we’ve made for 2023, we believe strongly in our ability to continue to grow at or above industry growth for the long run,” Broussard said. “We have consistently grown faster than the industry, mainly to our differentiated Medicare Advantage capabilities. We responded quickly to our disappointing 2022 MA results by making meaningful adjustments to our product offering segmentation, distribution and marketing for 2023.”
“Medicare Advantage, with its strong demographic growth and superior value proposition, has only gotten started,” he said. Currently, there are 64.3 million Medicare-eligible individuals in the U.S., and this addressable market will continue to grow; by 2030, 1 in 5 U.S. residents will reach retirement age when customers age into Medicare eligibility.
“They have a choice to either enroll in a Medicare Advantage Plan or the traditional Medicare program. We’ve seen Medicare-eligible customers increasingly choose a Medicare Advantage product—the penetration of total Medicare eligibles at 48%. In 2022, representing a $348 million market, this penetration rate is up 1,000 basis points from 2017 to 2021. And most external forecasts suggest mid- to high single-digit growth rates for the Medicare Advantage industry through 2025,” he said.