Humana Posts Strong Q1 Profit, Reaffirms 2025 Outlook Amid Medicare Advantage Challenges

Humana, one of the largest health insurers in the United States, has reported a robust first-quarter profit of $1.2 billion, surpassing Wall Street expectations. The company has also reaffirmed its guidance for the full year 2025, demonstrating confidence in its strategic direction despite ongoing challenges in the Medicare Advantage (MA) market.

Q1 Financial Performance and Membership Trends

Humana's earnings per share for the first quarter reached $11.58, significantly exceeding analysts' projections of $9.98. While the company's revenue of $32.1 billion fell slightly short of the expected $32.2 billion, it still represents a solid performance in a challenging market environment.

The insurer reported a medical loss ratio (MLR) of 87.4% for Q1, which aligns with anticipated performance. For the full year, Humana expects an MLR between 90.1% and 90.5%, reflecting the broader industry trend of higher costs in the Medicare Advantage space.

Membership figures show a decline to 14.8 million as of March 31, down from 16.2 million in the prior-year quarter. This decrease is largely attributed to Humana's strategic decision to exit certain low-performing markets due to MA cost pressures, resulting in a loss of 446,000 members in Q1. The company anticipates a total reduction of about 500,000 Medicare Advantage members for the year.

Medicare Advantage Challenges and Strategic Responses

The Medicare Advantage market continues to present challenges for major insurers, with elevated medical costs impacting performance for more than a year. Humana, like its competitors, has attributed this trend partly to patients catching up on elective procedures that were delayed during the COVID-19 pandemic.

In response to these challenges, Humana is taking several strategic actions:

1. Focusing on operational efficiency to mitigate cost pressures
2. Investing heavily in improving star ratings performance
3. Pursuing legal action against the Centers for Medicare & Medicaid Services (CMS) over the latest round of star ratings
4. Exiting underperforming markets to optimize its MA portfolio

Humana's management expressed optimism about the 2026 proposed rate notice for MA, stating that it "better reflects the medical cost trend environment and should enable greater stability."

Diversification and Growth Initiatives

While facing headwinds in Medicare Advantage, Humana is actively pursuing growth in other areas:

1. The company reported membership growth in stand-alone Medicare prescription drug plans and Medicaid.
2. Humana is taking a strategic approach to Medicaid expansion, with a particular focus on dual-eligible beneficiaries.
3. The CenterWell unit, which includes Humana's senior-focused primary care business, saw revenue growth from $4.8 billion in the prior year quarter to $5.1 billion.

Jim Rechtin, Humana's President and CEO, commented on the company's performance and outlook: "Our team has done a great job launching us on a strong start to the year. Medicare Advantage is performing as expected and we are excited about our progress in expanding CenterWell and Medicaid. We are confident in the growth outlook for value-based care and Medicare Advantage, which will allow us to provide more quality care to a broader group of patients and members."

Humana maintains its full-year earnings per share guidance of $16.25, reaffirming its outlook for 2025 despite the ongoing challenges in the healthcare market.