Consumer / Employer, Payers

Is Exiting the Employer Insurance Market a Smart Move for Humana?

Over the next 18 to 24 months, Humana will exit the Employer Group Commercial Medical Products business, which includes fully insured plans, self-funded plans and Federal Employee Health Benefit plans. The decision represents Humana's move to double-down on its Medicare Advantage business, one expert said.

Humana announced last week that it will exit the Employer Group Commercial Medical Products business, which includes fully insured plans, self-funded plans and Federal Employee Health Benefit plans. But is this the right move for Humana? One payer expert believes it likely is as Humana doubles-down on its Medicare Advantage business.

“I think we’re entering an inflection point in our industry where there is increasing differentiation and specialization and a realization that you can’t be great at all things for all people,” said Sachin Jain, CEO of SCAN Health Plan, in an interview. “I view this as a smart, strategic move to really narrow Humana’s focus to work more in the government program space and more directly focus health plan efforts on Medicare.”

SCAN Health Plan itself is a Medicare Advantage plan covering patients in Arizona, California, Nevada and Texas.

Humana has the second highest enrollment number for Medicare Advantage, a recent report by The Chartis Group found. It has more 5.3 million members in 2023, whereas UnitedHealthcare has more than 8.6 million. Nationwide, Medicare Advantage enrollment grew by 1.5 million beneficiaries this year to 29.5 million people total, with Humana accounting for 22.5% of that growth and UnitedHealthcare accounting for 55.2%.

While MA is ever popular, there is a lot of pressure on the Medicare Advantage market right now, Jain added.

“The federal government recently announced its advance rate notice, which many are saying will reflect a pretty significant cut to Medicare Advantage revenues,” he said. “I think time will tell whether this is a smart, strategic move. But on the surface, the idea of focusing on Medicare Advantage and its adjacent businesses is a drive toward greater strategic focus.”

Jain’s comments were echoed by Ash Shehata, KPMG U.S. National Sector Leader of Healthcare and Life Sciences. Shehata declined to speak about Humana specifically due to company policy, but spoke more generally about why a payer would choose to exit the employer market.

“A payer that operates in different lines of business will require heavy investment in all of those areas to remain competitive,” Shehata said in an email. “Therefore, one of the reasons they would choose to exit the employer market is to be able to refocus in core areas rather than distributing focus across multiple areas.”

However, exiting the employer market does have implications for employers and employees, Shehata said. First, employees will now have concerns about whether their provider will still be in-network. That is a burden especially for those with chronic conditions. They’ll also be worried about maintaining similar out-of-pocket expenses as in the past when they were covered by their previous plan. Processes for submitting claims and enrolling in pharmacy benefits will likely change. Lastly, many consumers use other benefits offered by health plans, such as telemedicine, weight loss programs and mental health programs. These will all have to transition to a different carrier, creating headaches for both insured employers who were previously covered by the payer and self-insured employers for whom the payer administered the plans, Shehata said. 

Humana’s exit in the Employer Group Commercial Medical Products business will be phased out over the next 18 to 24 months. The insurer has 986,400 members in these health plans. Humana said that no other businesses — including Medicare Advantage, Group Medicare, Medicare Supplement, Medicare Prescription Drug Plans, Medicaid, Military and Specialty — will be affected.

“This decision enables Humana to focus resources on our greatest opportunities for growth and where we can deliver industry leading value for our members and customers,” said Bruce D. Broussard, Humana’s president and CEO, in a news release.

Shehata added that there will likely be similar moves by insurers in the future.

“There is an expectation that we’ll see more and more health plan changes in the year to come. They may be exiting the market due to regulatory pressure, may be reconsolidating products in the market, or may be reconsolidating strategy in the market,” Shehata said.

Photo: Getty Images

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