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Humana CEO: To Capture Large Medicare Drug Market Share
By Peter Loftus, Dow Jones Newswires
October 31, 2005
Humana Inc. has priced its new Medicare drug-benefit plans to gain "large market shares," and hopes to eventually steer new drug-plan members to other, more lucrative Medicare health plans, Humana's chief executive said Monday.
The Louisville, Ky.-based health insurer said it expected to sign up about 1.7 million to 2.2 million next year for its Medicare prescription-drug plans, which take effect beginning Jan. 1. Medicare, the federal health-insurance program for the elderly, will begin subsidizing prescription-drug costs, with seniors paying relatively modest monthly premiums for the coverage.
Chief Executive Michael McCallister said Monday that, in 19 states, Humana will offer the only Medicare drug plans with monthly premiums of less than $20, compared with a national average of about $32. This low pricing will entitle Humana to automatically receive enrollment from certain low-income Medicare beneficiaries who currently get drug coverage under Medicaid.
"Our Medicare strategy is playing out exactly as designed," he told analysts during a conference call.
Once Humana signs up new members for its Medicare drug benefit plans, it will try to market to them other Medicare products such as Medicare Advantage, which is a privately administered HMO version of the government health-insurance program.
But while Humana expects Medicare to be a major source of profit growth, the company is seeing less favorable trends in its commercial health-insurance business. The company's forecast of at least $2.70 a share in 2006 earnings reflects "little or no improvement in the commercial business," Chief Financial Officer James Bloem told analysts.
Humana's commercial business has been hurt by aggressive pricing by competitors in certain markets, Bloem said. Also, the company has seen higher-than-expected inpatient hospital utilization by its members.
Humana said earlier its third-quarter net income fell to $49.9 million, or 30 cents a share, from $84.3 million, or 52 cents a share, a year earlier. The latest quarter included 27 cents a share in expenses for a litigation settlement and 3 cents a share in costs from the impact of Hurricane Katrina. Excluding the costs, earnings would have been 60 cents a share.
Third-quarter revenue rose to $3.82 billion from $3.18 billion a year earlier.
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