(Bloomberg) — Humana Inc. (NYSE:HUM) is the latest insurer to run into trouble in the Patient Protection and Affordable Care Act (PPACA) individual health-insurance markets.
The health insurer said that it probably won’t collect enough money to cover costs for some customers who bought individual plans, and will set aside what’s known as a premium deficiency reserve. The shortfall is for 2016 plans that comply with new rules under PPACA, Louisville, Ky.-based Humana said Friday.
UnitedHealth Group Inc. (NYSE:UNH), the biggest U.S. health insurer, said in November that it might stop participating in the PPACA exchange system next year after taking losses. One analyst predicted that Humana would follow suit.
“We expect Humana will exit Health insurance exchange marketplaces in 2017 in light of this data and focus on its Medicare Advantage book of business,” Ana Gupte, an analyst with Leerink Partners, said in a note to clients Friday. Medicare Advantage is the private-sector version of the U.S. program for the elderly.
Humana, which is being acquired by Aetna Inc. (NYSE:AET), said in a regulatory filing that it’s still working to determine the size of the shortfall. The insurer said it also expects its individual commercial membership to decline by about 200,000 to 300,000 people by Dec. 31, 2016. The enrollment figure includes plans sold under Obamacare along with older policies.
See also: Aetna to leave AHIP
The company said it plans to provide more information on its 2016 outlook when it releases fourth-quarter earnings on Feb. 10. Excluding costs tied to the premium deficiency reserve, 2015 adjusted earnings will probably be $7.75 a share, Humana said. The figure is in line with analysts’ expectations and the company’s November forecast.
Humana is adding members in Medicare Advantage. Its prescription-drug plan is adding 300,000 to 330,000 customers, and its individual Medicare Advantage plans will gain 100,000 to 120,000 members, according to the filing. The group Medicare Advantage business will probably lose about 120,000 to 125,000 members this year, the company said.
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