Humana's Exit and What It Means

Humana recently announced their exit from the commercial insurance market to pursue government-funded programs -- in effect going all in on Medicare.

We spoke with several leaders at Star Benefits to get their take, here's what they had to say.

Bill Mehus: Founder, CEO

Jeff Sands: Head of Sales

Phil Harrison: Regional Vice President, Sales

What does this move signify about where the market’s at, and the ability of large carriers to meet the needs of commercial customers?

Bill: Here’s the reality. Large carriers are feeling the squeeze more and more from employers over new requirements for transparency of costs and claims data. This squeeze is subsequently putting a squeeze on margins. And paired with the fact that federal programs are appealing from a servicing and financial perspective, it's not particularly surprising we’ll see these kinds of exits in the commercial space. Similarly, as these fees become more transparent it’s not obvious that groups are seeing the benefit of using their carriers’ networks to get fair prices. When there are record profits at the same time that players are exiting because of requirements to be transparent you know something’s broken.

Jeff: The industry is evolving! Many fully insured vendors will not be able to offer transparent insurance when the goal is so focused on profits. Current fully insured vendors keep buying up PBM’s, data analytic companies, medical management, and TPA’s to try to offset these challenges, but often to no avail. The current landscape of vendors will either need to adjust or leave the market altogether – which is what we’re seeing with Humana.

Phil: Ultimately, consolidation. Fewer options. Higher costs when procuring through the carriers. The move towards transparency has strong potential to reduce commercial market margins, which in effect makes supporting traditional markets less appealing. So the large carriers that are now “plagued” (eyeroll) with having to be transparent move to a more appealing market – leaving employers in the dust.

Humana is going all in on Medicare — does this indicate a broader trend??

Phil: The history of large insurance carriers is one of following the money. Nearly every major insurance payer saw record profits in 2022, yet instead of finding creative or alternative ways to serve the millions of groups in the commercial market they exit in order to pursue safer, more predictable margins. The public sector is a much more lucrative opportunity than the traditional commercial markets. B2C realigns member acquisition costs & resources and reduces the number of entities for costly reporting exercises and account management staff. Other administrative savings can be garnered by reducing the need to work with distribution channels through AI and tech-enabled solutions. Simplification and standardization across the board makes the path to profitability much easier.?

Bill: For many, medicare appears to be the biggest opportunity in health insurance (particularly so if you rely on vague pricing!). As baby boomers enter the medicare market, and as people live longer in general, it will be a very profitable place for large carriers to play. But it doesn’t eliminate the fact that millions of people not on Medicare will still rely on employer-provided plans that are transparent, rooted in fair pricing, and offer alignment between the employer’s needs and the plan.?

How should small groups view this decision? What does it mean for their needs and interests?

Bill: Headlines recently all read “Medicare Advantage yields strong margins…”. The employer isn’t even part of the equation. So, what it indicates is the large carriers can’t afford to serve you because they can’t afford to be transparent with you. If you’re a Humana client now and are up for renewal, there are a number of options (including Star Benefits) that give you more transparency and predictable costs without sacrificing the quality of the benefits you’re able to offer your employees.

Phil: ?It’s time to look beyond traditional health insurance solutions. Consolidation will likely reduce competitive scenarios in certain geographies and pricing will follow upwards. The need to maintain a flat-line or reduced budget is a reality during an economic downturn for Employers and health care inflation hasn’t slowed. Staying put - or inaction - is a risky venture.?

Is this an opportunity for advisors? How so? What should an advisor be doing right now?

Bill: Well – the easy answer is yes because there will be millions (if not billions) of premiums and thousands of lives open for renewals when the dust settles. But it also speaks to the fact that the market is demanding a different kind of experience that moves past legacy approaches. Being able to understand and provide alternative funding types and plans rooted in fair pricing, for example, will separate advisors on the forefront and advisors that are going in the wrong direction.?

Phil: Absolutely. But advisors need to understand when they are a fit and use a wide variety of partners with a trusted suite of solutions to better serve all of their markets. It’s almost always too risky to rely on just a few, look-alike entities like the BUCA's. Similarly, advisors are presented with an opportunity to bring clients and prospects into a deeper discussion about the financing and actual costs of healthcare, their alternatives and the true risks of pursuing this path (or the risk of inaction from just finding a cheaper carrier for 1 & 2 year increments).

Jeff: 100%. As more and more large carriers move to the federally-funded side of the house, progressive brokers have an opportunity to target traditional BUCA groups that may now be faced with an opportunity to revisit their benefits. And not just which carrier they want to partner with, but strategically, how they want to approach their benefits at large in order to create more transparency and alignment.?

Anything else?

Bill: The whole thing is unsustainable right now. Medicare will top 4% of the entire U.S. economy in 10 years. Politicians don’t have many options to curb this other than reducing payments or cutting benefits. It’s a relatively short-term play for carriers that haven’t figured out how to truly best serve, and align to, the needs of commercial markets.

Jeff Fixing healthcare is not about chasing margin or profit. It’s also not about doing what’s easy. The only way to fix healthcare is to focus on doing what’s right, and what’s right will always (for the foreseeable future) be dictated by the needs of employers and their employees. Not P/E figures or growth objectives. Employers and advisors should be focused on finding partners that have a similar vision for making a difference in healthcare.

Phil: Embrace change because it’s going to happen regardless if you want it to or not. There is minimal upside when working with the carriers other than maintaining status quo and minimizing change and disruption.?

Star Benefits stands for fixing healthcare, and our solutions are rooted in transparency, alignment, cost containment, and doing the right thing not just when it’s hard, but because it’s hard. Want to learn more? Give us a shout at [email protected] or follow our leaders here:

Bill Mehus

Jeff Sands

Phil Harrison

PS

Want to read what we’re reading?

Medicare Advantage yielded largest margin for insurers

Humana’s Exit from Employer Coverage Illuminates Medicare’s Lure

Medicare politics are on a crash course with reality

Large health system vs. payer profits in 2022