LOUISVILLE, Ky.--(BUSINESS WIRE)--Humana Inc. (NYSE:HUM) disclosed today its preliminary assessment of the
anticipated rate impact from the issuance by the Centers for Medicare
and Medicaid Services (CMS) of the final Announcement of Calendar Year
2014 Medicare Advantage Benchmark Rates and Payment Policies (the CMS
Final Announcement) which was issued by CMS after the close of market
trading on Monday, April 1, 2013.
Based on its review of the CMS Final Announcement, Humana expects its
2014 Medicare Advantage bid benchmark premium to include an increase for
medical cost trend of approximately 3.4 percent versus the previously
expected reduction of approximately 2.2 percent. The company also noted
that previously disclosed statutory reductions for Affordable Care Act
payment cuts and risk coding intensity adjustments are anticipated to
nearly offset the medical cost trend increase of 3.4 percent.
The CMS Final Announcement adjustments for risk coding recalibration and
county rebasing are anticipated to have a material negative impact upon
bid premiums in certain geographies in 2014. The company is completing
more detailed analyses of these additional adjustments and anticipates
further discussion in its first quarter earnings call on May 1, 2013.
“We are pleased that CMS has recognized the significant negative impact
the rates initially proposed for 2014 were expected to have upon the
millions of Medicare beneficiaries who choose Medicare Advantage plans,
but we believe certain of the technical adjustments may still present
meaningful challenges in certain geographies,” said Bruce D. Broussard,
President and Chief Executive Officer of Humana. “We thank the Members
of Congress who stood with their seniors to protect coverage under this
program. We will continue to work closely with CMS and our provider
partners to provide access to quality affordable health care services
and believe our integrated care delivery strategy will further those
efforts across multiple provider contracting models.”
The company continues to evaluate the anticipated impact of the CMS
Final Announcement as well as other statutory and regulatory changes and
the commensurate impacts upon its 2014 Medicare benefit offerings.
Market-by-market analyses will continue to be refined now that
county-specific rate details have been issued as part of the CMS Final
Announcement. Bid designs for the company’s 2014 Medicare Advantage
offerings are due to CMS on June 3, 2013.
Humana anticipates it will share 2014 operating margin, earnings and
membership expectations based on its approved Medicare bid designs
during the fourth quarter of 2013 after CMS makes 2014 benefit designs
for the entire sector publicly available.
This news release includes forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. When used in
investor presentations, press releases, Securities and Exchange
Commission (SEC) filings, and in oral statements made by or with the
approval of one of Humana’s executive officers, the words or phrases
like “expects,” “anticipates,” “intends,” “likely will result,”
“estimates,” “projects” or variations of such words and similar
expressions are intended to identify such forward-looking statements.
These forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties, and assumptions,
including, among other things, information set forth in the “Risk
Factors” section of the company’s SEC filings, a summary of which
includes but is not limited to the following:
If Humana does not design and price its products properly and
competitively, if the premiums Humana charges are insufficient to
cover the cost of health care services delivered to its members, if
the company is unable to implement clinical initiatives to provide a
better health care experience for its members, lower costs and
appropriately document the risk profile of its members, or if its
estimates of benefits expense are inadequate, Humana’s profitability
could be materially adversely affected. Humana estimates the costs of
its benefit expense payments, and designs and prices its products
accordingly, using actuarial methods and assumptions based upon, among
other relevant factors, claim payment patterns, medical cost
inflation, and historical developments such as claim inventory levels
and claim receipt patterns. These estimates, however, involve
extensive judgment, and have considerable inherent variability because
they are extremely sensitive to changes in payment patterns and
medical cost trends.
If Humana fails to effectively implement its operational and strategic
initiatives, particularly its Medicare initiatives (given the
concentration of the company’s revenues in the Medicare business), the
company’s business may be materially adversely affected.
If Humana fails to properly maintain the integrity of its data, to
strategically implement new information systems, to protect Humana’s
proprietary rights to its systems, or to defend against cyber-security
attacks, the company’s business may be materially adversely affected.
Humana’s business may be materially adversely impacted by CMS’s
adoption of a new coding set for diagnoses.
Humana is involved in various legal actions and governmental and
internal investigations, any of which, if resolved unfavorably to the
company, could result in substantial monetary damages. Increased
litigation and negative publicity could also increase the company’s
cost of doing business.
As a government contractor, Humana is exposed to risks that may
materially adversely affect its business or its willingness or ability
to participate in government health care programs.
Recently enacted health insurance reform, including The Patient
Protection and Affordable Care Act and The Health Care and Education
Reconciliation Act of 2010, could have a material adverse effect on
Humana’s results of operations, including restricting revenue,
enrollment and premium growth in certain products and market segments,
restricting the company’s ability to expand into new markets,
increasing the company's medical and operating costs by, among other
things, requiring a minimum benefit ratio on insured products (and
particularly how the ratio may apply to Medicare plans, including
aggregation, credibility thresholds, and its possible application to
prescription drug plans), lowering the company’s Medicare payment
rates and increasing the company’s expenses associated with a
non-deductible federal premium tax and other assessments; financial
position, including the company's ability to maintain the value of its
goodwill; and cash flows. In addition, if the new non-deductible
federal premium tax and other assessments, including a three-year
commercial reinsurance fee, were imposed as enacted, and if Humana is
unable to adjust its business model to address these new taxes and
assessments, such as through the reduction of the company’s operating
costs, there can be no assurance that the non-deductible federal
premium tax and other assessments would not have a material adverse
effect on the company’s results of operations, financial position, and
Humana’s business activities are subject to substantial government
regulation. New laws or regulations, or changes in existing laws or
regulations or their manner of application could increase the
company’s cost of doing business and may adversely affect the
company’s business, profitability and cash flows.
Any failure to manage operating costs could hamper Humana’s
Any failure by Humana to manage acquisitions and other significant
transactions successfully may have a material adverse effect on its
results of operations, financial position, and cash flows.
If Humana fails to develop and maintain satisfactory relationships
with the providers of care to its members, the company’s business may
be adversely affected.
Humana’s pharmacy business is highly competitive and subjects it to
regulations in addition to those the company faces with its core
health benefits businesses.
Changes in the prescription drug industry pricing benchmarks may
adversely affect Humana’s financial performance.
If Humana does not continue to earn and retain purchase discounts and
volume rebates from pharmaceutical manufacturers at current levels,
Humana’s gross margins may decline.
Humana’s ability to obtain funds from its subsidiaries is restricted
by state insurance regulations.
Downgrades in Humana’s debt ratings, should they occur, may adversely
affect its business, results of operations, and financial condition.
Changes in economic conditions could adversely affect Humana’s
business and results of operations.
The securities and credit markets may experience volatility and
disruption, which may adversely affect Humana’s business.
Given the current economic climate, Humana’s stock and the stock of
other companies in the insurance industry may be increasingly subject
to stock price and trading volume volatility.
In making forward-looking statements, Humana is not undertaking to
address or update them in future filings or communications regarding its
business or results. In light of these risks, uncertainties, and
assumptions, the forward-looking events discussed herein may or may not
occur. There also may be other risks that the company is unable to
predict at this time. Any of these risks and uncertainties may cause
actual results to differ materially from the results discussed in the
Humana advises investors to read the following documents as filed by the
company with the SEC for further discussion both of the risks it faces
and its historical performance:
Form 10-K for the year ended December 31, 2012;
Form 8-Ks filed during 2013.
Humana Inc., headquartered in Louisville, Kentucky, is a leading health
care company that offers a wide range of insurance products and health
and wellness services that incorporate an integrated approach to
lifelong well-being. By leveraging the strengths of its core businesses,
Humana believes it can better explore opportunities for existing and
emerging adjacencies in health care that can further enhance wellness
opportunities for the millions of people across the nation with whom the
company has relationships.
More information regarding Humana is available to investors via the
Investor Relations page of the company’s web site at www.humana.com,
including copies of:
Annual reports to stockholders;
Securities and Exchange Commission filings;
Most recent investor conference presentations;
Quarterly earnings news releases;
Replays of most recent earnings release conference calls;
Calendar of events (including upcoming earnings conference call dates
and times, as well as planned interaction with research analysts and
Corporate Governance information