(Corrects to 1.17 million, not 1.7 million, in fifth paragraph)
Oct 12 Health insurer Humana Inc on
Wednesday said a U.S. government health department cut its
quality rating on Humana Medicare plans that currently enroll
more than 1 million people, which could affect how much the
government pays the insurer in 2018.
Humana said it disagreed with the new quality ratings and
that it will ask the government to reconsider its assessment. It
also said it would take operational actions to mitigate the
financial impact of the ratings drop.
The cut could mean at least a $1 billion revenue hole for
2018, JP Morgan analyst Gary Taylor wrote in a research note. He
suggested that Humana could cut some benefits and move other
enrollees to higher performing plans to protect profits, but
that it would be difficult to cover all of the gap.
Shares of Humana, whose plan to be bought by larger rival
Aetna Inc is being challenged by the U.S. Justice
Department in court, fell 5.8 percent, or $10.34, to $167.19.
Aetna dropped $2.02, or 1.8 percent, to $110.05.
Humana said the government's updated "Star" ratings,
published on Wednesday, show the number of its members in 4-star
plans fell to 1.17 million from 2.15 million.
The government reimburses insurers more for 4-star rated
Medicare plans than it does for lower-rated plans.
The change in ratings would affect these payments in 2018,
but is not expected to impact membership growth in 2017, Humana
Humana raised its 2016 earnings forecast, citing
better-than-projected performance in its Medicare Advantage
Humana now anticipates earnings of about $8.80 per share on
a GAAP basis and about $9.50 on an adjusted basis for the year
ending Dec. 31, or $0.25 per share above its previous guidance.
Medicare uses a Star rating system to measure how well
Medicare Advantage and prescription drug plans perform. Medicare
scores are based on several categories including quality of care
and customer service. Ratings range from 1 to 5 stars, with five
being the highest and one being the lowest score.
(Reporting by Ankur Banerjee in Bengaluru and Caroline Humer in
New York; Editing by Chris Reese, Bernard Orr)