• Bull.




Takeaway: The MCO business faces some headwinds that are going to lead to the inevitable and needed consolidation from which HUM may benefit

Call Invite Feb. 9th @10am | HUM: Only the Strong Survive - 2022.01.24 HedgeyeLive  Autosaved

I have been quite critical of the MCOs over the last few months. For good reason, there is a lot to worry about. Benefit costs are and will continue to increase as CMS reduces annual payment updates. Demographic trends mean those turning 65 is slowing and it is a knife fight for new members. CMS has taken issue with some marketing practices that appear to have proliferated during the "lockdown" periods of COVID. The end of certain waivers has meant the loss of star ratings across the industry. Congress is likely to trim the program as it has become a target of Washington's policy nags.


When HUM started screening long on Tom Tobin's MicroQuad screen, it was worth taking a look. Despite an industry-wide deceleration  YoY% to about 5.5% in the January enrollment report, HUM's enrollment increased about 7%. They have managed to retain their 4.5-5 star ratings while competitors have lost them. And like the strongest plans, they are sitting on a lot of reserves that can manage the benefit line for some time to come. Those benefits costs will be further suppressed by excess mortality, particularly among those with chronic conditions. At the same time, HUM is not heavily exposed to the most chaotic problem facing the MCOs - Medicaid disenrollment.

The story of MA plans in 2023-24 is going to be one of consolidation as those that did not and could not manage through a pandemic exit the market. More viable plans are likely to be acquired. We have seen the first signs of that with ELV's purchase of Blue Cross Blue Shield of Louisiana. HUM is in a good position to benefit from that inorganic growth and take share from poorer performing plans. And more.

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Thursday, February 9th @ 10am ET (add to Outlook Calendar)

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Emily Evans
Managing Director – Health Policy