Humana exits $4B commercial market, goes ‘all in’ on Medicare

By Nona Tepper / February 23, 2023

Humana will leave the commercial health insurance market and focus its efforts on government-sponsored products such as Medicare Advantage, the company announced Thursday.

The insurer will phase out its fully insured, self-funded and Federal Employees Health Benefits Program plans, along with its wellness and rewards offerings, over the next 24 months, according to a news release. This line of business generated more than $4 billion last year, or less than 0.05% of the company's revenue, a Humana spokesperson wrote in an email.

Humana does not expect the decision to affect financial performance this year. The insurer will continue to serve the Medicare Advantage, Medicare Part D, Medicare supplement, Medicaid and TRICARE markets and retain its dental, vision and life insurance products.

“It hasn’t been a focus for the company for quite some. They are focused on Medicare Advantage. This is the ultimate proof of that, with them saying ’Let’s just go all in on MA,’” said Brad Ellis, senior director of health insurance at Fitch Ratings credit agency.

“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 our customers,” Humana CEO Bruce Broussard said in the news release. “It is in line with the company’s strategy to focus our health plan offerings primarily on government-funded programs and specialty businesses, while advancing our leadership position in integrated value-based care and expanding our CenterWell healthcare services capabilities.”

Humana declined to make an executive available for an interview.

Humana's employer-sponsored plans had 986,400 policyholders at the end of 2022, down nearly 16%, and the company expected membership to decline by another 300,000 this year “as we remain focused on optimizing our cost structure and margin in this line of business,” Chief Financial Officer Susan Diamond said during the company’s fourth-quarter earnings call this month.

The company’s commercial membership was small proportionally and relative to its competitors, Ellis said. Less than 10% of Humana's 17 million policyholders were enrolled in commercial plans last year. By contrast, commercial customers make up more than half of UnitedHealth Group's 46.3 million members, for example.

Humana is restructuring as part of a $1 billion plan to grow its Medicare Advantage business. Humana is the second-largest Medicare Advantage carrier with 5.1 million enrollees. The company's Medicare Advantage membership grew nearly 14% for the current plan year, nearly five times the industry average.

The macroeconomic climate and the COVID-19 pandemic’s continued disruption may inspire other insurers to reconsider their offerings, said Matt Wolf, director of RSM’s financial advisory practice. “We will see a wide variety of moves. Everything needs to be more calculated, more careful as organizations look for novel ways to sustain their balance sheet,” he said.