The Associated Press November 1, 2010, 1:16PM ET

Insurer Humana's 3rd-quarter profit rises 30 pct

Humana Inc.'s third-quarter earnings climbed 30 percent as Medicare Advantage enrollment rose and the insurer joined competitors in reporting a drop in health care use.

The Louisville, Ky., managed care company said Monday it saw unusually low levels of medical care use in its commercial health insurance. That contributed to a benefit of 31 cents per share the company received in the third quarter because claims leftover from previous quarters came in lower than expected.

Chief Financial Officer Jim Bloem said Monday the insurer is seeing slightly shorter hospital stays and less intensive or shorter procedures that he attributes in part to better care management.

Bloem said Humana and health insurers in general are "getting better at figuring out what the appropriate care is and making sure that the people who really need that care get it."

Other insurers, including UnitedHealth Group Inc., also have recently reported drops in health care use.

Care management can involve a range of issues such as covering preventive care or matching patients with higher-quality, lower cost providers. Health insurers definitely have improved their care management, said Robert Laszewski, a former insurance executive who's now a consultant.

But Laszewski said he doesn't believe the improvement is big enough to drive a quarter-over-quarter or year-over-year drop in use.

"Without a doubt, the sector is getting better at managing care, but it's an inch at a time, not a yard at a time," he said.

Laszewski and analysts who follow the sector say the tough economy also plays a role in reducing use, with patients putting off procedures or care to save money.

Humana earned $393.2 million, or $2.32 per share, for the three months ended Sept. 30. That's up from $301.5 million, or $1.78 per share, a year earlier.

Revenue rose 9 percent to $8.42 billion.

Analyst polled by Thomson Reuters expected, on average, earnings of $1.66 per share on revenue of $8.46 billion.

Humana said its Medicare Advantage enrollment climbed 17 percent in the third quarter to more than 1.7 million people, compared with the same period last year. Humana is the second largest provider of Medicare Advantage plans, trailing UnitedHealth.

Medicare Advantage plans are privately run versions of the government's Medicare program. Subsidized by the government, the plans offer basic Medicare coverage topped with extras or premiums lower than standard Medicare rates.

Humana also offers Medicaid and commercial coverage and insurance for military members and their families. The insurer's commercial enrollment, which includes individual insurance and employer-sponsored group coverage, fell 9 percent in the quarter to 3.1 million people.

But that segment also contributed a $68.1 million pretax profit, compared with a $5.2 million loss in the same quarter last year. Humana credited pricing discipline and cost reductions, along with lower use, for the improvement.

Humana said it now expects 2010 earnings between $6.40 and $6.50 per share, up from a previous forecast of $5.65 to $5.75. Analysts predict $6.42 per share.

The insurer said it raised its forecast based on improved operating performance and the expectation of a contract extension for the Tricare military health insurance program.

Humana shares climbed 8 cents to $58.37 in Monday afternoon trading.

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AP Business Writer Michelle Chapman contributed to this report from New York.


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