Humana Inc. said it expects to lose nearly 10% of its Medicare drug-plan enrollees at the start of 2009 because it bid premiums too high to win an allotment of low-income, government-assigned members.Although some analysts suggested this might be positive for Humana's bottom line, since higher prices could bolster earnings and these members yield little profit, the Louisville, Ky., health insurer's stock took a hit Tuesday. Humana shares fell nearly 5% to $41.75 in after-hours trading after it announced it would lose all of its 308,000 "dual-eligible" Medicare members, a source of instant market share for many of the companies that sell and administer the benefit.
This group comprises more than six million Medicare beneficiaries who are so poor that they also qualify for the joint state-federal Medicaid program. To ensure they still get drug coverage and to avoid Medicare fraud, the government provides a fully subsidized benefit and automatically allocates them among those private drug-plan providers that end up submitting bids below the average of those received.
UnitedHealth Group Inc., with 5.4 million drug-plan members, is the biggest provider. Humana has 3.1 million enrollees.
Wall Street Journal; September 10, 2008
