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About Humana Insurance Company

Medicare has made Humana a big-time player in the insurance game. Humana is a Medicare Advantage HMO, PPO and PFFS organization providing Medicare Advantage plans and prescription drug coverage to approximately 5 million members throughout the US. It also administers managed care plans for other government programs, including Medicaid plans in Florida and Texas and TRICARE (for military personnel) in the South. Additionally, Humana offers commercial health plans and specialty (life, dental, and vision) coverage; it also provides its members with access through their networks of health care providers such outpatient surgery centers, primary care providers, specialist physicians, dentists, and providers of ancillary health care services. All told, it covers more than 20 million members in the US.

Operations

Humana operates through three primary segments: Retail, Healthcare Services, and Group and Specialty.

The Retail segment brings in more than 60% of Humana's revenue. Most of its sales come from government program premiums -- primarily Medicare premiums. The segment also provides some commercial individual health plans including HMOs and PPOs. The group also holds a collection of contracts with states to provide Medicaid, dual-eligible, and long-term support services benefits as well as its contracts with the Centers for Medicaid and Medicare Services (CMS).

Humana's Healthcare Services segment accounts for about 30% of revenue. It provides wellness programs that encourage its members to make healthy lifestyle choices. This segment provides services such as pharmacy solutions, provider services, clinical care services, and predictive modeling and informatics services to other Humana businesses, as well as external health plan members, external health plans, and other employers or individuals.

The Group and Specialty segment accounts for about 10% of revenue. It sells commercial health plans (including HMOs and PPOs) to corporate accounts on a fully-insured basis or an ASO (administrative services only) basis. Specialty benefits including dental, vision, and life insurance are marketed to individuals and employers, as well.

The group's former Individual Commercial segment consisted of its individual commercial fully-insured medical health insurance operations, which it exited in early 2018.

Geographic Reach

Humana has expanded the geographic reach of its Medicare plans, and now has at least one Medicare product available in every state in the US. Its largest markets are located in the southern and midwestern US, including Florida, Texas, and Kentucky.

In addition to its headquarters in Louisville, Kentucky, the company has locations for customer service, enrollment, and/or claims processing in Tampa, Florida; Cincinnati, Ohio; San Juan, Puerto Rico; and Green Bay, Wisconsin.

Sales and Marketing

Humana markets its products through television and radio ads, the internet, telemarketing, and direct mailings. It employs some 1,400 sales representatives as well as around 1,400 telemarketing representatives to sell its retail products; additionally, the company markets its individual Medicare products through an alliance with Wal-Mart. Humana uses licensed independent brokers, independent agents, and employees to sell its group products.

Health and supplemental coverage is offered to individuals, families, service personnel, and communities at large.

Humana generates more than 80% of its total premiums and service earnings from contracts with the federal government.

Financial Performance

Humana's aggressive and creative expansion strategies have led to positive financial growth over the past five years, with a slight decline of revenue in 2017. Overall, between 2015 and 2019, the company's revenue saw a growth of 20%. Net income has been climbing, but, like revenue, it has had a couple of down years, largely due to divestitures.

In 2019, revenue increased 16% to $64.9 billion primarily due to higher premiums in the Retail segment, driven by higher premium revenues from their Medicare Advantage business resulting from membership growth and higher per member premiums associated with individual Medicare Advantage, partially offset by the decrease of sales in services revenue in the Group and Specialty segment.

Net income rose 61% to $2.7 billion in 2019. This increase primarily was impacted by their Medicare Advantage business and Healthcare Services segment, as well as by previously implemented productivity initiatives that led to significant operating cost efficiencies in 2019.

The company ended 2019 with $4.1 billion in net cash, $1.7 billion less than it had at the end of 2018. Operating activities provided $5.3 billion while investing activities used $1.3 billion and financing activities used another $2.3 billion.

Strategy

Over time, the company has become a top Medicare plan provider by aggressively pursuing growth within its government operations, including covering dual-eligible Medicare/Medicaid members and participating in state health insurance exchanges. It is ambitious in its efforts to sign up Medicare recipients for its Medicare Advantage and Part D prescription plans. Humana is also focused on reaching the fast-growing segment of the population that has one or more chronic conditions, particularly aging persons or those who are already covered by Medicare Advantage plans.

Humana is focusing on its care delivery model, which unites quality care, high member engagement, and sophisticated data analytics. The core elements of this is to improve the consumer experience by simplifying the interaction with the company, engaging members in clinical programs, and offering assistance to providers in transitioning from a fee-for-service to a value-based arrangement. The model is designed to improve health outcomes and affordability for individuals and for the health system as a whole, while offering their members a seamless healthcare experience. Humana believes that this strategy is positioning them for long-term growth in both membership and earnings.

Humana frequently engage in discussions with third parties regarding possible investments, acquisitions, divestitures, strategic alliances, joint ventures, and outsourcing transactions and often enter into agreements relating to such transactions in order to further expand their business objectives. In order to pursue their acquisition strategy, we are identifying suitable candidates for and successfully complete transactions.

Mergers and Acquisitions

In the first quarter of 2020, Humana acquired Enclara Healthcare, or Enclara, one of the largest hospice pharmacy and benefit management providers for cash consideration of approximately $707 million.

Humana's Partners in Primary Care wholly-owned subsidiary entered into a strategic partnership with Welsh, Carson, Anderson & Stowe, or WCAS. The WCAS partnership is expected to open approximately 50 payor-agnostic, senior-focused primary care centers over 3 years beginning in 2020. Partners in Primary Care committed to the acquisition of a non-controlling interest in the approximately $600 million entity.

Company Background

David A. Jones, Sr., founded Humana in 1961 as a nursing home firm named Extendicare. The company moved out of the nursing home business and into the hospital business in 1972. It was renamed Humana in 1974.

Humana entered the insurance business in the 1980s and divested its hospital operations the following decade.

Humana Insurance Company

1100 Employers Blvd
Green Bay, WI 54344-0002
Phone: 1 (502) 580-1000

Firm Stats

Employer Type: Privately Owned

Major Office Locations

Green Bay, WI