Executives at Humana Inc. (NYSE:HUM) said a little more about medical loss rebate (MLR) calculations this week than some competitors have when they released their first-quarter earnings.
Humana, Louisville, Ky., is reporting $248 million in net income for the latest quarter on $10 billion in revenue, compared with $315 million in net income on $9.2 billion in revenue for the first quarter of 2011.
The company ended the quarter providing or administering medical coverage for 12 million people, up from 11 million people a year earlier.
Like other big, publicly traded health insurers, Humana is emphasizing the strong performance of its Medicare Advantage operations.
Humana executives talked a little more about the company’s commercial insurance operations than its peers, possibly because its fully insured medical enrollment increased 0.4%, to 1.2 million, and its individual commercial enrollment jumped 15%, to 442,000.
This quarter, one indicator of interest has been MLRs. The Patient Protection and Affordable Care Act of 2010 (PPACA) requires health insurers to spend 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts or else make up the difference by paying rebates.
How that will really work in practice has been somewhat mysterious.
UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH), said it was reporting a substantial gain for 2011 because of a change in its MLR rebate estimate. UnitedHealth did not give many details about the MLR adjustment, and other health insurers have made few intelligible comments about MLRs.
Humana says it's making a $15 million MLR adjustment in its favor for the first quarter of 2011, with $13 million tied to commercial group plans and $2 million to individual plans. The company has not said what percentage or number of enrollees will get rebates, or how far it missed the PPACA MLR mark at the plans where it missed the mark.
James Bloem, Humana’s chief financial officer, said during the earnings call that the MLR rebate adjustment “was primarily attributable to the refinement of state-level calculations based on the first quarter runout of claims.”
THE EXCHANGE BUSINESS
PPACA is supposed to spur the creation of a new system of state-supervised health insurance exchanges, or Web-based insurance supermarkets.
Many insurers and technology companies have been trying to get a jump on the PPACA exchange competition by setting up private exchanges or expanding established exchange programs.
Blue Cross and Blue Shield of Minnesota, Eagan, Minn., has picked eHealth Inc., Mountain View, Calif. (Nasdaq:EHTH), a company that operates the multi-carrier eHealthInsurance.com exchange system, to set up an exchange system specifically for its Blue Choice defined contribution employer-sponsored health insurance program.
An employer can use the program to contribute a set amount of cash for each employee’s health coverage, then put the employee in charge of shopping for the desired coverage.