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Humana

Humana

Humana Inc., headquartered in Louisville, Kentucky, is one of the nation's largest publicly traded health benefits companies, with approximately 7 million medical members located primarily in 15 states and Puerto Rico. Humana offers coordinated health insurance coverage and related services — through traditional and Internet-based plans — to employer groups, government-sponsored plans and individuals. Humana has proven over its 43-year history that it embraces change and has seized opportunities that have helped to transform its business. Today, innovation serves as Humana's growth engine as we transform the company's business to give our customers personalized, actionable health benefits information in real time. With the right blend of product designs and the use of digital technology to achieve administrative simplicity for employer groups, physicians, hospitals and other health care providers, Humana is poised to take advantage of the tremendous opportunity offered by the growth of information technology.

Humana offers coordinated health insurance coverage and related services to employer groups, government-sponsored plans and individuals through:

Administrative services products
Preferred provider organizations
Consumer driven plans
Health maintenance organizations
Government-sponsored plans
Plans for U.S. military dependents and retirees

The company's specialty products — dental, life and disability insurance — complement its core health offerings. Humana provides health benefits and related services to companies ranging from fewer than 10 to tens of thousands of employees. Humana offers a wide range of products and services designed specifically to meet the needs of small businesses, too. Small employers can choose from a broad spectrum of cost-effective health plans. With Humana, small businesses enjoy the convenience of having a single source of employee benefits, along with expert advice to get the most from their benefit dollar.

Financial Ratings

Fortune 200 company with annual revenues of approximately $13 billion
Total assets of approximately $5.4 billion as of Sept. 30, 2004
Investment-grade credit ratings by Moody's, Standard & Poor's and Fitch
Weiss Rating: C

LOUISVILLE, Ky., Aug 01, 2005 /PRNewswire-FirstCall via COMTEX/ -- Humana Inc. (NYSE: HUM) today reported $0.51 diluted earnings per common share (EPS) for the quarter ended June 30, 2005 (2Q05) compared to $0.50 EPS for the quarter ended June 30, 2004 (2Q04). Results for 2Q05 were slightly better than the company anticipated due to higher-than-expected enrollment gains in the company's Medicare operations. (2Q04 EPS included $0.04 per share net benefit from unusual items.)

"This quarter's results reflect the increasing momentum we are seeing in our Medicare operations, together with solid execution in our other diversified lines of business," said Michael B. McCallister, Humana's president and chief executive officer. "Humana's dedication to the consumer, supported by both innovation and operational diligence, has us well positioned for future growth."

The company continues to anticipate EPS for the year ending December 31, 2005 (FY 2005) in the range of $2.23 to $2.25. The company also announced that it further anticipates growth in EPS of at least 25 percent for 2006, or $2.80 per share.

"Given the magnitude of our Medicare opportunity for 2006 and our thorough preparation to take advantage of it, we are comfortable with our ability to achieve the results we are forecasting today," McCallister said.

Information as of 8/1/05.

Plan Features

During the late 1990's Humana went through a metamorphosis and we are not sure what it morphed to since Humana has changed its niche target a few times since. Most agents with years of experience are waiting for Humana to find the niche and go get it. We do not believe that they have yet identified that workable niche, and we do not know if they are going to grow or be acquired. To understand Humana, you need to understand their 5 year history.

In the late 1990's, United Healthcare bid to acquire the company. Due diligence on the part of United Healthcare caused the deal to fall apart and Humana made rapid changes to it's profitable small group business. To this day, we are not sure why they went down this path. In 2000 and 2001, most of our customers experienced trend increases that averaged over 50% where industry trend was in the high teens to low twenties. Until 2004, Humana renewals were still something to be fearful of. Since 2000 , Humana has made aggressive changes in benefits plans. What used to beat out, or compete with, Blue Cross and Anthem in Illinois and Indiana respectively, was cheapened especially with very defensive drug card benefits. Humana is currently floating a fixed benefit drug card that we can't, in good conscience, sell to any client.

In 2000-2002, Humana, through underwriting and price changes, drove away many small groups of less than 10. Humana then opened the spigots and aggressively went after the 25+ market. That blew up badly as well with horrible experience and renewals in 2003 and early 2004.

What Humana has done well is reestablish the Senior market and is going for the individual market. We aren't sure where they are the top choice for small business. We don't currently believe that their hybrid HRA/HSA product is better than self created plans with the help of an administrator.

Humana is still excellent at customer service and the entrenched school of thought at the company is "customers first". They are very accommodative. The comprehensiveness of the office copay is excellent. The drug card benefit options are hard to understand how they are priced. Plan on taking a high copay card and avoid the fixed benefit card if offered. The Supplemental accident benefit is a must have. For those with or looking for an HMO option from Humana, forget it unless you are very confident with your physician group.

Humana plans and administration reminds me of an all-star athlete that is in an extended slump with brief flashes of brilliance.

Underwriting & Renewals

Underwriting

Humana has made some very positive changes in their underwriting process. In 2004 Humana changed the way they will pre-undewrite a group facilitating an easy process to get done. This used to be Humana's domain. High marks for the way they do business now.

Humana also gets good marks for sensible ratings on medical conditions. They do seem poised to write more business in the Midwest region with small business. If the product is priced competitively for good health customers underwriting will give it preference with underwriting for those with medical conditions.

Renewals

Humana has shown reasonable consistency in pricing since 2004. If you have a traditional benefit plan with Humana for more than a year, you probably won't be disappointed with your renewal. Price Trends from Humana PPO plans in 2004 and 2005 have been below average carrier trends. HMO trends have not been as good. Most HMO members are financially incented to look at other carriers. Most people with Humana for more than 2 years have migrated to higher deductible plans in order to keep plan costs down. These plans are rich in first dollar benefits and you may find yourself looking at plans with even higher copays to keep the plan priced competitively.