01—Abstract
Summary
Summary of the 8-K filed February 5, 2024. Cited figures are marked; the original filing is the authoritative source.
On January 31, 2024, after market close, the Centers for Medicare and Medicaid Services (CMS) issued its preliminary 2025 Medicare Advantage and Part D payment rates and proposed policy changes (the Advance Notice), with final rates scheduled for publication on April 1, 2024.
CMS estimates Medicare Advantage plans across the sector will, on average, experience a 0.16 percent decrease in benchmark funding based on the proposals, an estimate that excludes the impact of fee-for-service county rebasing/re-pricing. Humana Inc. estimates that, based on its preliminary analysis using the same factors as CMS, the proposals would result in a change to its benchmark funding approximately 160 basis points worse than its expectation of a flat rate environment. The company attributes the difference primarily to proposed effective growth rate restatements, which it did not anticipate given higher medical cost trends across the industry, and to the negative impact of CMS's proposed normalization factors.
Humana plans to provide CMS actuarial data on these concerns and formal commentary on the Advance Notice's effects on beneficiaries' quality of care, affordability, and service. Humana stated there is no change to its 2025 outlook of $6 to $10a in Adjusted Earnings Per Share (EPS) growth, noting that the Advance Notice is preliminary and that the company and others in the industry are expected to provide feedback to CMS.
02—Key points
Key Highlights
- CMS issued preliminary 2025 Medicare Advantage and Part D payment rates and proposed policy changes (Advance Notice) on January 31, 2024, with final rates due April 1, 2024.
- CMS estimates sector-wide Medicare Advantage benchmark funding will decrease 0.16 percent on average under the proposals, excluding fee-for-service county rebasing/re-pricing impact.
- Humana estimates the Advance Notice would result in a benchmark funding change approximately 160 basis points worse than its expectation of a flat rate environment.
- Primary drivers cited by Humana: proposed effective growth rate restatements (not anticipated given higher industry medical cost trends) and the negative impact of CMS's proposed normalization factors.
- Humana will provide CMS actuarial data on its concerns and formal commentary on the impact on beneficiaries' quality of care, affordability, and service.
- Humana states no change to its 2025 outlook of $6 to $10 in Adjusted EPS growth, as the Advance Notice is preliminary.
03—Questions
Frequently Asked Questions
What did CMS propose for 2025 Medicare Advantage payments?
CMS issued preliminary 2025 Medicare Advantage and Part D payment rates and proposed policy changes on January 31, 2024. CMS estimates that Medicare Advantage plans across the sector will, on average, experience a 0.16 percent decrease in benchmark funding based on these proposals.
How much does Humana expect its benchmark funding to be affected?
Based on its preliminary analysis, Humana anticipates the proposals would result in a change to its benchmark funding approximately 160 basis points worse than its expectation of a flat rate environment.
What is driving the negative impact on Humana?
Humana attributes the difference primarily to proposed effective growth rate restatements, which it did not anticipate given higher medical cost trends across the industry, and to the negative impact of CMS's proposed normalization factors.
Has Humana changed its 2025 earnings outlook?
No. Humana stated there is no change to its 2025 outlook of $6 to $10 in Adjusted Earnings Per Share growth, noting the Advance Notice is preliminary and that the company and others in the industry are expected to provide feedback to CMS.
When will the final rates be published and what happens next?
CMS has invited public comment before publishing final rates on April 1, 2024 (the Final Notice). Humana will continue analyzing the Advance Notice, provide CMS actuarial data on its concerns, and submit formal commentary.
04—Continue