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Humana might get $575 million in PPACA risk program flow

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Humana Inc. says it could get about $240 million from the three new federal “three R’s” risk-management programs for the first half of the year.

Humana (NYSE:HUM) could be on track to get a total of $575 million to $775 million in Patient Protection and Affordable Care Act (PPACA) three R’s money for all of 2014. Roughly three-quarters of the money could come from a temporary PPACA reinsurance program.

Executives at WellPoint Inc. (NYSE:WLP) declined to talk about what think they could get from the three R’s programs.

See also: 

Aetna may get $50 million in PPACA reinsurance money

Assurant hopes to get $140 million in PPACA ’3 R’s’ money

The drafters of PPACA created the three R’s in an effort to stabilize the individual and small-group health insurance markets, by protecting insurers against any big swings in risk that might occur as a result of the new PPACA major medical underwriting, pricing and product design rules.

Insurers are supposed to pay $63 per commercial plan enrollee for the reinsurance program this year. WellPoint is on track to pay more than $840 million in PPACA reinsurance program fees this year, for example, and Humana is on track to pay about $200 million in reinsurance fees. The companies won’t know what, if anything, they owe for the risk corridors and risk-adjustment programs until later.

The topic came up today during conference calls the companies held to go over second-quarter earnings.

WellPoint is reporting $731 million in net income for the quarter on $18 billion in revenue, compared with $800 million in net income on $17 billion in revenue for the second quarter of 2013.

The company ended the quarter covering 37 million people, or 4.5 percent more than it covered a year earlier. Individual enrollment increased 11 percent, to 2 million, and commercial group plan enrollment increased 4.3 percent, to 15 million. The company was covering 769,000 people through qualified health plan (QHP) coverage sold through the new public exchange system.

Joe Swedish, WellPoint’s chief executive officer, said the company recognizes that QHP enrollees might use their coverage later in the year, when they understand their plans better. “The paid claims trends thus far are encouraging,” Swedish said during the call.

Humana is reporting $344 million in net income for the latest quarter on $12 billion in revenue, compared with $420 million in net income on $10 billion in revenue for the comparable quarter in 2013.

Total medical plan enrollment increased 10 percent, to 14 million. Insured group enrollment increased 1.2 percent, to 1.2 million, and self-funded plan enrollment fell 6.6 percent, to 1.1 million. Individual enrollment climbed to 1.1 million, from 478,000. Humana says the increase was “driven primarily by the company’s participation in health care exchanges.”

Humana has been offering expensive, rich, “platinum level” QHPs. One analyst asked whether the company would continue to offer those plans, given the likelihood that the platinum QHPs might attract people with enrollees.

Humana executives said they think the platinum plan market is an attractive segment for their company, because of the PPACA risk-adjustment program, their company’s experience with managing enrollees with chronic health problems, and the possibility that consumers who buy platinum QHPs might be good customers for Humana’s Medicare Advantage plans.