Humana Inc. said Thursday it has decided to exit the Employer Group Commercial Medical Products business, which includes fully insured, self-funded and Federal Employee Health Benefit medical plans and rewards programs.
The move comes after a strategic review found that the business was no longer likely to meet the needs of commercial members in the long term, or to support the health insurer’s overall strategic plans.
“The company remains committed to the long-term growth of its core Insurance lines of business, including Medicare Advantage, Group Medicare, Medicare Supplement, Medicare Prescription Drug Plans, Medicaid, Military and Specialty (Dental, Vision, Life, etc.), as well as its CenterWell healthcare services business,” the company said in a statement.
The business will be phased out over the next 18 to 24 months.
The company said it now expects first-quarter adjusted EPS to account for about 33% of full-year adjusted EPS, down from prior guidance of about 35%.
Humana
HUM,
specializes in Medicare insurance and has been working to expand its Medicare Advantage business. The company added at least 625,000 Medicare Advantage members in 2022, or 13.7% growth over the prior year, according to its recent quarterly earnings.
See now: Humana beats profit expectations but revenue comes up a bit shy
The company had about 17 million members in its medical benefit plans as of Dec. 31, and about 5 million members in specialty plans.
See: Health-insurance stocks drop after Medicare Advantage proposes lower rates for 2024
The company is also focused on its CenterWell business, which offers home healthcare and pharmacy services. In December, it realigned its business into two segments — insurance and CenterWell — instead of three.
RBC said the news was not a surprise, given the company’s focus on Medicare Advantage, its efforts to build out CenterWell and value-based capabilities, as well as its shrinking commercial footprint over the past few years.
The company had under 1 million full-risk commercial and ASO (administrative services only) members at year-end, equal to just under 6% of medical membership, analyst Ben Hendrix wrote in a note to clients.
On Thursday, it raised its guidance for 2023 Medicare Advantage enrollment to at least 775,000 new net members, or up 17%, compared with prior guidance of more than 625,000, or up 14%.
“We note that MA mix has reached nearly 77% of the company’s risk-based membership by our calculation based on CMS’ February enrollment data,” said Hendrix. “Pro-forma for the commercial exit, we believe that MA mix would account for ~83% of full-risk membership. “
RBC has an outperform rating on Humana stock, the equivalent of buy.
The stock was up 0.7% in early afternoon trade and has gained 22% in the past 12 months, while the S&P 500 index
SPX,
has fallen 6%.
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