Humana to reorganize operations as part of $1 billion value-creation plan

Humana will restructure its operations next year to drive enrollment and expand the services it sells to other payers, executives said Wednesday.

The company will divide the organization into two units: health insurance services and CenterWell, the company’s care delivery and healthcare services arm, CEO Bruce Broussard said during a second-quarter earnings call. The decision to reorganize is part of its $1 billion “value-creation plan,” a cost-cutting strategy Humana announced in February after increased competition cut into the insurer’s Medicare Advantage growth.

Broussard said the insurer expects to complete an external search for a president to lead the insurance division by the end of the year. “A key focus of this role will be to continue to simplify our structure to be more agile,” he said.

Humana is the nation’s second-largest Medicare Advantage insurer, behind UnitedHealthcare, with 5.1 million members. UnitedHealthcare has 6.9 million Medicare Advantage members.

Humana invested in increased marketing and boosted its use of brokers to attract more Medicare Advantage members during open enrollment this year, Chief Financial Officer Susan Diamond said during the call.

“Our goal is to return to industry leading growth,” Diamond said. “We’d love to do that in one year, we just have to see whether peers made investments in 2023 and ultimately how that stacks out.”

In addition to growing its insurance membership, Humana’s value-creation plan focuses on consolidating its customer service centers, increasing enrollee use of in-house clinical programs and investing in consumer technology services.

The company sees a significant opportunity to grow the care delivery assets it sells to other insurers, Broussard said. Humana reported a $203 million expense during the quarter related to these initiatives.

“Both CenterWell and home health are agnostic and we continue to see great growth servicing other payers and other parts of the Medicare system, as well as in the area of pharmacy for agnostic growth,” Broussard said.

Humana sold a majority stake in the hospice arm of Kindred at Home to a private equity firm in April. The company anticipates the closing costs associated with the deal to rise as a result of increased interest rates, Diamond said during the call. The insurer expects the deal to close in the third quarter.

During the second quarter, Humana generated $23.6 billion in revenue, a 14.6% increase from the $20.6 billion reported during the same time last year. The insurer’s net income rose 18.5%, to $697 million, from $588 million reported during the year-ago period.