Rising health insurance costs are having a noticeable effect on employers’ health coverage purchases at Humana Inc.

Humana, Louisville, Ky., is reporting $84 million in net income for the first quarter on $4.7 billion in revenue, compared with $107 million in net income on $3.3 billion in revenue for the first quarter of 2005.

One reason for the drop in net income is accounting issues related to the start of the new Medicare Part D prescription drug program, according to Humana.

Humana expects claims costs to average about 88% of revenue for the full year, but because of the way the contracts and reporting rules work, the actual ratio for the first quarter was about 96%, the company says.

In the commercial health coverage sector, the average amount of premium per fully insured commercial plan member has increased about 7% over the past year, but Humana says many larger employers are getting away from use of fully insured plans.

The percentage of covered employees in “administrative services only” plans rather than fully insured plans increased to 43% for the latest quarter, up from 37% for the first quarter of 2005, Humana says.

Although the amount of premium per fully insured commercial plan member has increased about 7% over the past year, the number of fully insured plan members is down, Humana says.

Meanwhile, “premium yield and medical cost trends for small group business currently include a higher level of benefit buydowns versus large employers,” Humana says.