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The Catch: MLR Rebates Ding Humana

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Humana Inc. (NYSE:HUM) seems to be putting more emphasis on its Medicare operations than its employer group operations these days, but it took the time today to mention the effects of the new federal minimum medical loss ratio (MLR) rules on the employer group business.

Humana, Louisville, Ky., is reporting $199 million in net income for the fourth quarter of 2011 on $9.1 billion in revenue, up from $107 million in net income on $8.3 billion in revenue for the fourth quarter of 2010.

The company notes that fourth-quarter net earnings were significantly higher than earnings for the comparable quarter in 2010. Back in the fourth quarter of 2010, Humana added $139 million to the benefit reserves backing a closed block of 35,000 long-term care insurance (LTCI) acquired along with KMG America back in 2007.

The addition to the LTCI reserves amounted to an average of about $4,000 per policy.

No new policies have been added to the block since 2005, Humana says.

Humana ended the quarter providing for administering coverage for about 11 million people, up from about 10 million a year earlier.

Enrollment in the company’s HumanaOne individual commercial health insurance program increased 16%, to 433,600.

Fully insured commercial group plan enrollment fell 6%, to 1.2 million.

“This decline primarily reflected continued dedication to pricing discipline in a highly competitive environment for large group business partially offset by small group business membership gains,” Humana says.

The percentage of Humana group plan enrollment coming from small groups increased to 56% at the end of 2010, up from 48% a year earlier.

The minimum MLR provisions in the Patient Protection and Affordable Care Act of 2010 (PPACA) now require carriers to spend at least 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts. Companies that miss those thresholds are supposed to send customers rebates.

Humana says MLR rebates contributed to a 2% reduction in employer group revenue, to $2.3 billion.

The rebates also contributed to a 2-percentage-point increase in the benefit ratio, or the percentage of premiums spent on benefits, to 86.4%.

Some of the increase was due to an unexpected increase in enrollment in employer-sponsored group Medicare Advantage plans, but most was due to the minimum MLR requirements, company executive said during an earnings call.

Carriers may give more details about MLR rebates when they file formal Form 10-K annual reports with the U.S. Securities and Exchange Commission. So far, none of the major carriers has filed a 2011 10-K.


Coventry Health Care Inc., Bethesda, Md. (NYSE:CVH), is making a point of saying its CoventryOne unit welcomes individual health insurance applications from early retirees. The company keeps rates low for early retirees who qualify by using medical underwriting and high deductibles.

A healthy 62-year-old woman in Missouri, for example, might pay as little as about $161 per month in exchange for accepting a $5,000 individual policy deductible.


Highmark Inc., Pittsburgh, has hired Health Advocate Inc., Plymouth Meeting, Pa., to offer enrollees a 24-hour, telephone-based care navigation service.

Health Advocate — one of the first independent companies to specialize in helping patients with billing and health insurance matters –will help Highmark enrollees with matters such as finding doctors and specialists, scheduling doctor appointments, transferring medical records from one provider to another, and helping members understand their benefits.