Humana HQ

Updated with detailed segment results, stock price.

Humana on Wednesday reported that second-quarter profits fell 20 percent as the insurer said it expects to lose $208 million more on its Obamacare business than previously projected.

The Louisville-based company also confirmed its higher earnings projection from July 21. The insurer’s shares fell in the morning but then climbed steadily throughout the day.

Humana posted pretax income of $636 million, down 20 percent from a year earlier — though last year’s results included gains from the sale of Concentra. Excluding that sale, pretax income rose 24 percent. Diluted earnings per common share, at $2.06, were down 28 percent — but without the impact from the Concentra sale, EPS rose 30 percent.

Humana said Wednesday morning that all business lines exceeded management’s expectation, with the exception of the individual commercial business, which includes the sicker-than-expected patients the insurer gained on the health exchanges established by the Affordable Care Act, also known informally as Obamacare.

Humana said it now expects to lose $337 million this year on patients it gained on the ACA, up more than $200 million from its previous projection.

The announcement came one day after rival and potential merger partner Aetna also reported significant challenges with its Obamacare business. Aetna previously had stated that it expected to break even on the ACA business but a terrible second quarter prompted the insurer to say Tuesday that it now expects to incur a $300 million loss on that business.

Humana reiterated that it plans to stop offering insurance plans on state exchanges in four states next year and will severely curtail its ACA-compliant offerings across the nation.

Humana also said it expects to earn $8.55 per share for the year. It had raised its earnings projection on July 21 based on the strength of its Medicare Advantage and Healthcare Services businesses.

“We are pleased that our year‐to‐date financial results are demonstrating consistently strong operational execution across our core businesses, though challenges in our Individual Commercial business remain,” Brian A. Kane, senior vice president and chief financial officer, said in a press release.

Results by segment

Humana said its retail segment generated pretax profit of $320 million, up 23 percent from a year earlier. The increase reflected an improvement across most business lines, including Medicare benefits, which more than offset difficulties with the individual commercial business, which includes the Obamacare patients.

The company said premiums and service revenues in the retail segment were $12 billion in the second quarter, up 4 percent compared to the same period from last year. Membership in its Individual Medicare Advantage business, at 2.8 million, also increased 4 percent.

Humana also said that membership in its stand-alone Prescription Drug Plan rose 9 percent, to 4.85 million, primarily because of growth in its low-price Humana-Walmart plan offering.

Meanwhile, the company’s individual commercial membership fell 24 percent, to 792,000, because the company stopped offering some ACA-compliant plans and lost customers who did not pay their premiums.

The insurer said its group segment, which provides insurance for employers and the military, produced pretax income of $101 million in the second quarter, more than double the results from a year ago.

A slight increase in the number of military customers was more than offset by membership declines in other areas, including group specialty products, where membership fell 5 percent, to just under 5.9 million.

Humana said it generated pretax profits of $271 million in its health care services segment, up 22 percent from a year earlier, thanks primarily to higher revenues from its pharmacy solutions and home-based services businesses. For example, the number of Medicare Advantage customers who joined the company’s chronic care program rose 20 percent, to 614,200.

“These increases reflected greater focus on members living with the most chronic conditions,” the company said.

Humana’s shares on Wednesday closed at $173.48, up 2.31 percent. The S&P 500 rose 0.31 percent.