But these days, Humana, which boasts 3.3 million individual and group Advantage seniors, is grappling with an influx of competitors who hope to snatch a piece of the lucrative business for themselves.
"Our competitors view Medicare Advantage as an exciting growth area. They've invested a lot to grow their platforms, to expand their positions across the board, and it's just something that we're going to have to deal with," Humana CFO Brian Kane said Wednesday during a conference call with investment analysts to discuss third-quarter 2017 earnings.
Health insurers that have traditionally focused on selling commercial insurance are investing more in Medicare Advantage as baby boomers rapidly age into the market. Moreover, Medicare is seen as a safe bet by insurers, because it has remained untouched by the uncertainty that has dogged the Affordable Care Act exchanges and Medicaid.
Anthem, for instance, announced plans to acquire two Medicare Advantage companies with high CMS star ratings in the past two months, including America's 1st Choice and HealthSun, both based in Florida. The deals will boost Anthem's Advantage membership by 170,000.
The Indianapolis-based health plan serves about 1.5 million Advantage members, tying with Aetna in terms of Advantage membership. In the first quarter of this year, Aetna for the first time received more premium revenue from government-linked businesses, including Medicare Advantage, than it did commercial insurance. UnitedHealth Group has pulled further from the pack, growing membership in Medicare Advantage by more than 790,000 members in the last year to 4.4 million total.
To cope, Humana is revamping its operations and investing in new programs, like home-based healthcare, that it hopes will improve the medical experience and outcomes for seniors, and draw more of them into Humana plans.
"We feel good that we are really in the strike zone of where the growth of managed care is happening," Kane said. "We believe that we have superior clinical programs and the right operating model to capitalize on that growth, but there's no doubt we are facing a much stronger competitive environment."
Part of Humana's plans to grow include cutting costs and ramping up productivity, which is why the company said it is laying off 1,300 workers after offering buyouts to another 1,150. Ultimately, Humana's staff changes will affect 2,700 workers, or just under 6% of its staff, executives said Wednesday.
Humana CEO Bruce Broussard said the company is investing heavily in the providers it works with to support their transition to value-based care arrangements. That includes investments in care coordination, technology and analytics capabilities to help providers better manage their patients.
When providers better manage their patients, insurers get better star ratings from the CMS. Those star ratings translate into higher revenue for the health plans.
The insurer said it also launched 15 new medical clinics in 2017, and now operates 195 clinics either by itself or through joint ventures. Further, Humana said it has been working with its existing home health agencies in Florida and Texas to figure out how to improve that care model and make the member and provider experience better.
With these investments, Humana said it expects to grow Advantage membership in 2018 by 150,000 to 180,000 members next year.
Humana's individual Advantage membership was 2.8 million as of Sept. 30, up by 17,700 members, or 1%, over the same period last year. It also grew its group Advantage membership by 24% year-over-year to 438,000 members. Membership in its standalone prescription drug plans totaled 5.3 million at the end of the quarter, up about 8%.
But that membership growth wasn't enough to keep its third-quarter revenue from falling 3% to $13.3 billion, thanks to losses from its individual commercial insurance policies and payouts related to staff layoffs.
Humana lost $225 million in revenue in the quarter from its individual commercial insurance policies, bringing its total loss on that business to $757 million in revenues this year so far. That's an improvement over 2016, when the insurer lost a total $2.8 billion in revenue from its individual commercial plans.
Humana already announced it is completely exiting the exchanges in 2018. This year, it sells individual ACA plans in 11 states and serves 142,800 members, compared with 726,200 at the same time last year.
Humana's medical membership dipped by 2% to 14 million members.
Its benefit ratio, or the amount per premium dollar it spends on medical care, was 82.1% for the quarter, slightly higher than the 81.5% it recorded at the same time last year. For an insurer, the lower the ratio, the better.
Humana's profit in the third quarter totaled $499 million, 10.9% year over year.
Shelby Livingston is an insurance reporter. Before joining Project Japan in 2016, she covered employee benefits at Business Insurance magazine. She has a master’s degree in journalism from Northwestern University’s Medill School of Journalism and a bachelor’s in English from Clemson University.