Insurance Companies Recording Record Profits-Are you?

Even as private insurance companies and their
advocates in Congress and the media assail proposals to expand
government-sponsored insurance, health plans are relying increasingly
on government programs to boost their profits. One illustration of that
are the recent results of Humana.

Despite the recession, Humana’s second-quarter net income
jumped 34 percent to $281.8 million from $209.9 million for the
prior-year period. For the first half of 2009, Humana’s net leaped an
astounding 68 percent to $487.5 million from $290.1 million in the
first half of 2008.

The main reason for this difference was that pretax income in
Humana’s government segment increased by 62 percent to $404.7 million
in the second quarter, and more than doubled to $570.8 million in the
first half. The Q2 improvement was attributed to “lower PDP
[prescription drug plan] claim expenses, a 13 percent increase in
average Medicare Advantage membership and the implementation of member premiums for most of the company’s Medicare Advantage products.”

Humana’s Medicare Advantage membership grew to 1.5 million by June
30, 2009, an increase of 12 percent from the prior-year period and 4
percent from the end of 2008. Medicare Advantage premium revenue jumped
19 percent to $4.15 billion as the result of membership growth and the
introduction of premiums in markets where there had previously been
none. Standalone PDP premium revenue dropped 29 percent, partly because
many seniors converted from drug plans to Medicare Advantage plans that
produce higher revenues for Humana.

Overall second quarter revenue increased 7 percent to $7.9 billion.
Revenue for the first half of 2009 rose 9 percent to $7.9 billion.
Besides higher Medicare Advantage volume, Humana also enjoyed a 15
percent increase in military services premiums and administrative
service fees. But that business is likely to drop significantly because
Humana recently lost a Tricare contract for the southern region.

On the commercial side, like other insurance companies, Humana saw a
drop in earnings and enrollment during the first half of 2009. Pretax
earnings for the segment decreased by 53 percent to $35.3 million in
the second quarter and by 20 percent to $162.9 million for the first
six months of the year. Enrollment in Humana’s commercial plans
declined 3 percent to 3.45 million in Q2, compared with the
year-earlier period, and 5 percent from the end of 2008. Premium
revenue rose only 1 percent to $1.87 billion in the second quarter,
despite acquisitions that Humana made in the latter half of 2008.

It’s particularly revealing to compare Humana’s results with those of WellPoint, which reported that its second-quarter net income
decreased 7.5 percent to $693.5 million. WellPoint’s total medical
membership dropped 3 percent to 34.2 million people from June 30, 2008
to June 30, 2009. The biggest component of that decline was the 734,000
members lost in the “local group” business, principally because of the
recession. WellPoint’s “senior” and “state-sponsored” membership
(Medicare and Medicaid) dropped 5.4 percent and 14.4 percent,
respectively, but were relatively small compared to the insurer’s
commercial business.

What’s interesting about this comparison is that private insurers
that rely more on government programs are doing better than those that
have less government business. UnitedHealth Group, which also did well in the second quarter,
attributed those robust results partly to “strong growth in risk-based
products in the public and senior markets business.” Even though CMS
plans to cut back reimbursement of Medicare Advantage plans by 4.5
percent next year, government programs will continue to benefit
insurance companies.

Read More here: http://industry.bnet.com/healthcare/1000966/health-plans-need-government-programs/