Health and Science

Humana profit beats on slow recovery in demand for optional medical care

Health insurer Humana beat third-quarter profit estimates on Tuesday, benefiting from lower medical costs as demand for optional healthcare services remained below pre-pandemic levels.

The company also raised the lower end of its full-year adjusted profit view, expecting strong growth in its Medicare Advantage business that offers health plans to people older than 65 or with disabilities.

U.S. health insurers, including UnitedHealth and Anthem, saw low demand for health-care services in the third quarter, even though there was some recovery in elective procedures, which partly offset costs related to Covid-19 testing and treatment.

This helped Humana's adjusted consolidated benefit expense ratio, the percentage of premiums spent on claims, which stood at 85.3% in the reported quarter, better than analysts' average estimate of 85.93%, according to Refinitiv IBES data.

Patients' use of health-care services remained at 95% of normal levels in the third quarter, which reduces the risk of demand for the services snapping back faster than Humana assumes, Jefferies analyst David Windley said in a client note.

Humana now expects full-year adjusted profit between $18.50 and $18.75 per share, compared with its previous estimate of $18.25 to $18.75.

It anticipates losses in the fourth quarter due to normalized demand for optional health-care services and Covid-19 testing and treatment costs.

Sales from Humana's retail unit, which includes Medicare plans, rose about 19% to $16.74 billion, as the unit added more members to its Medicare Advantage plans and on higher premiums.

The company now expects to enroll 375,000 members this year in its Medicare Advantage business, up from its previous expectation to enroll 330,000 to 360,000 members.

Excluding items, the company earned $3.08 per share in the third quarter, beating estimates of $2.81 per share.