UnitedHealth, Humana see unexpected rise in Medicare Advantage costs


The largest Medicare Advantage insurers want to cut benefits, increase premiums and make other structural changes to their plans next year to account for higher-than-anticipated medical expenses this year.

Claims for inpatient stays, emergency department visits, outpatient surgeries and dental services are coming in at higher levels than expected, Humana disclosed in a Securities and Exchange Commission filing Friday. Humana also reported that its Medicare Advantage enrollment has grown faster than projected, particularly among those newly eligible for the program. Humana has previously noted that new Medicare beneficiaries are less profitable than those who switch from other Medicare Advantage carriers because their risk codes are not yet collected.

Humana expects higher cost trends to persist throughout the year, and aims to offset them by dipping into investment income and reserves, and cutting some administrative functions. The company built these cost considerations into its Medicare Advantage bids for the next plan year, which were due to regulators on June 5.

The company did not immediately respond to an interview request.

Humana, the second-largest Medicare Advantage carrier with 5.6 million members, experienced an 11.1% enrollment increase for the current plan year, higher than the industry average. UnitedHealth Group is the largest Medicare Advantage carrier with 7.5 million members. UnitedHealth Group and Humana combine for a 46.5% market share in the lucrative Medicare Advantage market.

UnitedHealth Group also reported its Medicare Advantage members were scheduling more doctor visits than anticipated. After deferring care during the COVID-19 pandemic, older adults are returning to outpatient centers for hip, knee, heart and other surgical procedures at “meaningfully higher” rates than expected, Chief Financial Officer John Rex said during the Goldman Sachs Global Healthcare Conference on Wednesday.

“There are some indications that it looks a little bit like pent-up demand, or delayed demand, being satisfied,” Rex said.

UnitedHealth Group reassured investors that it holds adequate reserves to cover medical expenses, and that it priced for these trends in its Medicare Advantage bids for 2024. The company did not immediately respond to an interview request.

Increased utilization is not the only thing Medicare Advantage underwriters consider when structuring bids for the coming year.

Regulators tightened how private Medicare plans are audited, paid and reviewed for quality, leading some insurers to say they would pare back supplemental benefits. The Centers for Medicare and Medicaid Services also tinkered with the risk-adjustment model, although both UnitedHealth Group and Humana said its three-year phase-in gives them sufficient time to adapt.


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