Humana reports higher Q4 revenue but wider loss, issues cautious 2025 outlook

Humana Inc. closed the fourth quarter of 2024 with a mixed financial performance, marked by higher-than-anticipated revenue alongside widening losses. The Louisville, Kentucky-based health insurance giant reported consolidated revenue of $29.21 billion, up from $26.46 billion in the same period the previous year. This growth exceeded Wall Street’s expectations of $28.81 billion, reflecting strong momentum in its Medicare Advantage and state-based contracts.

However, despite the robust top-line growth, Humana faced mounting financial pressures, posting a net loss of $693 million, or $5.76 per share, compared to a loss of $541 million, or $4.42 per share, in the fourth quarter of 2023. The deepened losses were largely driven by escalating medical costs and strategic business exits, including the company’s withdrawal from certain underperforming commercial medical plans.

What factors drove Humana’s revenue growth in Q4 2024?

Humana’s revenue surge was underpinned by two key growth drivers: higher per-member Medicare premiums and increased membership in its Medicare Advantage and state-based contracts. The company’s focus on expanding its government-backed health plans has been a consistent growth strategy, enabling it to capitalise on the ageing U.S. population’s healthcare needs.

The insurer’s Medicare Advantage segment remained a core revenue generator, with premiums benefiting from pricing adjustments tailored to offset rising medical costs. Additionally, growth in state-based contracts further bolstered revenue, reflecting Humana’s efforts to diversify beyond traditional Medicare offerings.

However, revenue gains were partially offset by declining membership in stand-alone prescription drug plans (PDP) and the impact of Humana’s decision to exit unprofitable group commercial medical businesses. This strategic retreat was aimed at reallocating resources toward higher-margin segments but has contributed to short-term financial headwinds.

How did Humana’s operational costs and medical expenses impact its bottom line?

While revenue growth painted an optimistic picture, Humana’s profitability was eroded by rising medical costs and operational inefficiencies. The company’s adjusted loss per share for the quarter stood at $2.16, slightly better than the $2.21 loss expected by analysts. Nonetheless, this marked a significant decline from the adjusted loss of just $0.11 per share in the fourth quarter of 2023.

The widening losses were attributed to elevated medical cost trends within the Medicare Advantage segment, including higher utilisation rates and increased costs for inpatient and outpatient services. Humana’s benefit expense ratio—a key metric reflecting the percentage of premiums spent on medical claims—rose to 91.5%, up from 90.7% a year earlier. This increase underscores the growing challenge of managing healthcare expenses amid inflationary pressures and evolving patient needs.

Moreover, the insurer faced impairment charges and costs related to its exit from employer group commercial medical products, further straining its bottom line. Despite ongoing cost-saving initiatives, including administrative efficiencies and value creation projects, these measures were insufficient to fully offset the rising expense burden.

What is Humana’s earnings outlook for 2025, and what challenges lie ahead?

Looking ahead to fiscal 2025, Humana provided a cautious earnings forecast, projecting adjusted earnings per share (EPS) of approximately $16.25, slightly above the $16.21 reported for 2024. This guidance, however, falls short of analysts’ consensus estimate of $16.71 per share, signalling continued headwinds in the near term.

A key challenge for Humana in 2025 will be the anticipated decline of around 550,000 individual Medicare Advantage members, representing roughly a 10% reduction from 2024. This decline is primarily due to the company’s strategic decision to exit certain unprofitable plans and counties, a move designed to improve long-term profitability but one that will impact short-term membership figures.

Additionally, Humana expects its GAAP earnings per share to be around $15.88, reflecting the financial impact of ongoing investments in operational excellence. The company remains focused on enhancing its CenterWell healthcare services, including primary care, pharmacy solutions, and home health services, as part of its strategy to diversify revenue streams and reduce reliance on traditional insurance offerings.

What strategies is Humana implementing to navigate market headwinds?

Despite the challenges, Humana’s leadership remains confident in its long-term growth strategy. “We are confident in our long-term strategy, and 2025 will be a critical step in returning to compelling, normalized margins,” said Jim Rechtin, Humana’s President and Chief Executive Officer.

The company plans to continue investing in its Medicaid and CenterWell businesses, which are expected to drive increased earnings contributions over the medium to long term. By focusing on value-based care models, Humana aims to improve patient outcomes while managing costs more effectively.

Furthermore, the insurer is committed to operational efficiency, with ongoing initiatives to streamline administrative processes and enhance digital health capabilities. These efforts are designed to improve cost structures and position Humana competitively in an increasingly dynamic healthcare landscape.

Humana’s fourth-quarter results highlight the complex interplay between revenue growth and cost management in the healthcare industry. While the company has demonstrated resilience through strong revenue performance, persistent medical cost pressures and strategic shifts in its business model have weighed on profitability.

As Humana navigates these challenges in 2025, its focus will remain on strategic investments, operational efficiency, and adapting to the evolving healthcare landscape to achieve sustainable growth. Investors and stakeholders will be closely watching how effectively the company balances growth initiatives with cost control in the coming year.