Humana, Aetna, UnitedHealthcare all cashing in on Silver Tsunami

Aetna, Humana and UnitedHealthcare all reported positive financial results this quarter and executives cited the same reason: swelling numbers of Medicare Advantage enrollees, otherwise known as the Silver Tsunami.

When Humana on Wednesday reported net income for the first quarter of $491 million, a drop compared to the $1.12 billion during the first three months of 2017, CFO Brian Kane explained that the payer saw an uptick in Medicare Advantage specifically.

“We experienced strong Medicare Advantage enrollment growth and solid performance across all segments in the first quarter, with early positive indicators of medical utilization allowing us to raise guidance for the year,” Kane said.

A cool $1 billion

Yes, there’s a reason why Kane would consider that drop in reported net income to be positive.

Humana’s pretax earnings were $707 million compared to $1.6 billion from the year before, primarily due to the net gain in 2017 from the breakup fee in the terminated $34 billion merger agreement with Aetna. Aetna owed Humana $1 billion, in fact, that explains the lower earnings this year.

Aetna’s earnings come from the opposite side of that failed merger.

On Tuesday it announced first-quarter net income of $1.2 billion compared with a net loss of $381 million during the first-quarter of 2017. That same $1 billion payment also figured into its results.

UnitedHealthcare, for its part, reported an 18.8 percent year-over-year income increase last week.

Humana’s membership grew by 6 percent to 3 million for the quarter, while Aetna’s membership expanded by 250,000 and

UnitedHealth gained 330,000 MA members for a 10.6 percent increase year-over-year.

The Medicare Advantage market is competitive and also under-penetrated, Brian Thompson, CEO for UnitedHealthcare Medicare & Retirement said.

Thompson added that it has 33 percent of senior citizens in plans today, but the company sees a path to over 50 percent in the next 5-10 years.

And if a final notice from the Centers for Medicare and Medicaid Services is any indication MA could get more lucrative.

Humana expects to have a 3 percent rate increase on its individual Medicare Advantage plans for 2019, based on the Centers for Medicare and Medicaid Services announcement in April of the Medicare Advantage capitation rates and MA and Part D payment policies.

Based on the final rate notice, CMS had estimated a 3.5 percent increase in the Medicare Advantage sector. The difference between the Humana and CMS projections primarily results from the geographic distribution of the insurer’s members relative to the national average.

In addition, CMS’s final rate notice clarified that the agency has the authority to permit Medicare Advantage organizations to offer tailored supplemental benefits to address the social determinants of health — additional flexibility that would allow payers to include supplemental benefits that improve health outcomes for its members.

Twitter: @JELagasse
Email the writer: