Another big health insurer has released fourth-quarter earnings, and a little more information about what the new world created by the Patient Protection and Affordable Care Act (PPACA) is really like.

Humana Inc. (NYSE:HUM) put details on enrollment in PPACA exchange qualified health plans (QHPs) and enrollment in new, PPACA-compliant individual coverage sold outside the PPACA exchange system right alongside details about enrollment in Medicare Advantage plans, fully insured commercial group plans and other types of plans.

The company also gave estimates of the possible effects of the PPACA “three R’s” risk-management programs. Those programs include:

  • A temporary reinsurance program, which is supposed to protect individual coverage issuers against the cost of covering enrollees with very high medical bills.

  • A temporary risk corridors program, which is supposed to use cash from carriers with strong underwriting results to help carriers with weak results.

  • A permanent risk-adjustment program, which is supposed to shift money from plans with enrollees with low claim risk scores to plan with enrollees with high risk scores.

Bruce Broussard, Humana’s president, emphasized that Humana is trying to get away from relying on the three R’s programs this year by increasing individual health coverage premiums.

“We’ve been very disciplined there,” Broussard said during a conference call with securities analysts.

Humana said it plans to let higher prices drive total on-exchange and off-exchange individual commercial health insurance enrollment down about 9 percent to 10 percent this year, to about 931,200.

Humana is reporting $145 million in net income for the latest quarter on $12 billion in revenue, compared with a $30 million net loss on $10 billion in revenue for the fourth quarter of 2013.

See also: PPACA pays off for insurers

The company ended the quarter providing or administering medical coverage for 14 million people, up from 12 million a year earlier.

For a look at what Humana and its executives have been saying about the effects of PPACA, read on.

Sales guy waiting by a phone

1. Self-insured plan enrollment shrank.

Before major PPACA commercial health insurance changes took effect in January 2014, some observers predicted that employer plan flight from PPACA group health changes would increase employers’ use of self-insurance.

Anthem Inc. (NYSE:ANTM), for example, recently reported that enrollment in the self-insured employer plans it administers increased 12 percent between the end of 2013 and the end of 2014, to 23 million.

At Humana, fully insured group plan enrollment held steady at about 1.2 million.

Enrollment in self-insured, “administrative services only” plans fell 5 percent, to 1.1 million.

“This decline reflects continued discipline in pricing of services for self-funded accounts amid a highly competitive environment,” the company said.

Measuring tape

2. The “three  R’s” program money could amount to a value equal to about half of the company’s net income.

Humana says it ended 2014 with 554,800 exchange QHP enrollees; 131,500 enrollees in off-exchange, PPACA-compliant coverage; and 329,900 in off-exchange grandmothered or grandfathered plans that do not meet all PPACA coverage requirements.

The company says it hopes to collect $679 million in three R’s program payments for its 2014 business.

The receivables include $586 million in PPACA reinsurance program money, $42 million in risk-adjustment program money, and $51 million in risk corridor program money.

The total value of those payments amounts to only about 1.4 percent of the company’s 2014 revenue but about 59 percent of its net income.

Some insurers have decided that controversy about the risk corridors program has put the collectibility of that money in doubt. Humana has dealt with concerns about collectibility by noting in a footnote that, for each of the three R’s programs, operation of the program is subject to federal administrative action.”

Piggy bank under pressure

3. Humana lost money on PPACA-compliant coverage as a whole in 2014.

Ana Gupte, an analyst with Leerink Partner, noted during the Humana call that other health insurers’ statements about the three R’s imply that at least two lost money on sales of new, off-exchange, PPACA-compliant coverage. 

Brian Kane, Humana’s chief financial officer, said he did not want to distinguish between on-exchange and off-exchange pricing.

“As we said, we’ve been very disciplined on pricing with our entire ACA-compliant book,” Kane said. “Off-exchange is part of our strategy. We’re looking to mitigate the losses in both the off-exchange and on-exchange. And, all-in, we do expect to do that this year.”

Some of the numbers that looked bad in the third quarter of 2014 as a result of “grandmothering,” or rules changes that let some pre-PPACA policies stay in place longer than insurers had expected, improved in the fourth quarter, Kane said.

See also: Off-exchange dreams