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Humana's (HUM) Medicare Business Aids, High Costs Persist

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Humana Inc. HUM is well poised for growth on the back of its solid Medicare Advantage plans.

The company delivered a positive earnings surprise in all the last four quarters, the average being 7.79%.

Humana’s Medicare business has been performing strongly over the last many quarters. The Medicare Advantage business is consistently delivering solid returns owing to the company’s operating efforts.

It recently announced expanding its footprint in New Jersey by offering Medicare Advantage plans across Cumberland, Hunterdon, Mercer, Salem, Somerset, Sussex and Warren Counties.

Apart from widening its network, the company has concentrated on assisting its customers by tying up with local providers. This is evident from its August tie-up with Baptist Health Care via which Humana Medicare Advantage members will gain in-network access to Baptist Hospital, Gulf Breeze Hospital and Jay Hospital. In the same month, it entered into an agreement with McLaren Physician Partners through which Humana Medicare Advantage members can avail of eight additional McLaren Health Care hospitals and outpatient facilities.

In September 2019, it inked a partnership deal with Iora Health to add 11 Iora Primary care practices to its Medicare Advantage network in areas like Texas, Georgia and Arizona. With this pact, Humana Medicare Advantage members can experience an impactful, relationship-based primary care.

On Oct 1, 2019, Humana announced its plans for Medicare Advantage in 2020. The proposals will include fitness program memberships, dental, hearing and eye coverage, home support for caregivers, etc. The company’s efforts to enrich member's experience are mainly aimed at catering to certain social determinants of health that are food insecurity, conveyance  and social isolation.

All these measures bode well for the business line. Medicare membership surged 54% from 2013 to 2018. The company expects Individual Medicare Advantage membership in the band of 480,000-500,000, up from the previous projection of 415,000-440,000.

However, Humana has been witnessing a rise in the operating expenses since 2010. Although during 2017, the same declined 6%, it again increased 8.7% and 13%, each during 2018 and the first half 2019. The company expects to witness an elevation in benefit expenses, which will induce overall higher operating expenses. This is likely to hurt the bottom line.

Stocks That Warrant a Look

Some stocks worth a look from the medical sector are HCA Healthcare, Inc. HCA, Molina Healthcare, Inc. MOH and Anthem, Inc. ANTM.

HCA provides health care services. In the last four quarters, the company delivered average beat of 15.74%.

Molina offers Medicaid-related solutions to meet the healthcare needs of low-income families and individuals. In the trailing four quarters, the company’s average beat was 66.9%.

Anthem works as a health benefits company in the United States. In the preceding four quarters, the company pulled off average beat of 4.57%.

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