November 28, 2018 / 11:50 AM / 17 days ago

Humana cuts 2019 forecast for Medicare prescription drug plans

(Reuters) - Health insurer Humana Inc (HUM.N) said on Wednesday that enrollment for its 2019 Medicare prescription drug plans dropped as customers opted for lower priced options from rivals.

However, the company said it expected to add between 350,000 and 400,000 members to its Medicare Advantage health plans in 2019. It had previously expected additions of between 250,000 and 300,000 members.

“The announcement is a net positive with stronger Medicare Advantage growth more important than the continued large (prescription drug) declines,” Evercore ISI analyst Michael Newshel wrote in a note to clients.

Humana had said the Medicare Advantage plans, offered to people older than 65 or those with disabilities, were responsible for driving growth in the past few quarters.

For its standalone Medicare prescription drugs unit, Humana expects a drop of 750,000 to 800,000 members in 2019, compared with a drop of 500,000 estimated earlier.

Humana has decided to keep margins high and maintain membership levels across plans at a time when people search for cheaper health insurance amid sky-rocketing medical care costs.

“They are pricing to maintain margins rather than drive share,” Leerink analyst Ana Gupte said, referring to the company’s prescription drug plans.

Humana said the individual prescription drug plans, which it offers at Walmart Inc (WMT.N) stores, are no longer low-cost in any market for 2019. The plans cover about five million people.

The company competes with Aetna Inc AET.N, CVS Health Corp (CVS.N), Express Scripts Holding Co (ESRX.O) and UnitedHealth Group Inc (UNH.N) for prescription drug plan customers.

The company reaffirmed its 2018 profit forecast of about $14.40 per share. Analysts were expecting $14.43 per share, according to IBES data from Refinitiv.

Shares of the company, which also said it plans to buy back $750 million of its stock, were up 2.2 percent at $316.45 in morning trade.

Reporting by Manas Mishra and Saumya Sibi Joseph in Bengaluru; Editing by Shounak Dasgupta and Anil D'Silva

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