By Caroline Humer
(Reuters) - Humana Inc said on Wednesday that it received 202,000 applications for Obamacare health insurance plans, many of them from young people, but still gave a wide forecast for 2014 profit as it waits to see the demographics of future customers.
The U.S. health insurer made the disclosure as it reported a fourth-quarter loss due to a $243 million charge to set aside financial reserves for a group of long-term care policies that it no longer sells.
President Barack Obama's national healthcare reform law, often called Obamacare, set up state-based insurance exchanges to let individuals buy policies with income-based subsidies.
Enrollment in exchange products has been hampered by technology problems both with HealthCare.gov, the online marketplace for 36 states, and in some of the other 14 states that run their own sites.
In November, Obama asked insurers to allow old policies to be extended under political pressure to keep a promise he had made that people who liked their plan, could keep their plan. On Monday, the Congressional Budget Office lowered its estimate for total exchange enrollment to 6 million, citing these extensions. The government has said about 3 million people have signed up so far.
Humana, which previously cut its outlook for sign-ups by at least half because of the technology failures, said it saw that more customers than usual were extending their old health plans.
Because of the light enrollment, Humana said it expects that it will not get the proportion of healthy and sick customers that it had expected.
Still, Chief Executive Officer Bruce Broussard said that its first look at enrollees so far shows that they are "scaling a bit more to the younger side."
Young people, typically defined as adults under age 35, have fewer medical problems and are less expensive to insure, making them an important element to ensure the long-term viability of the exchanges.
"This could potentially mitigate some of the adverse impact associated with the risk pool deterioration from our higher membership in non-ACA compliant plans," Broussard said, in reference to plans that do not meet the criteria of the Affordable Care Act, also known as Obamacare.
Humana also said that costs of these patients interacting with its customer service centers have been higher than it anticipated.
WAITING ON PRIVATE MEDICARE RATES
Broussard also painted an uncertain outlook for its private Medicare Advantage business, which accounts for two-thirds of its revenue. The government is expected to announce 2015 reimbursement rates for private Medicare on February 21 that he said could cut funding by 6 percent to 7 percent.
Humana shares fell 1.3 percent to $96.25 while shares of competitors Aetna Inc, UnitedHealth Group Inc, WellPoint Inc and Cigna gained. Aetna and Cigna also report this week.
"It all falls back to Medicare Advantage reimbursement rates and what is going to end up being the ultimate enrollment demographics for the exchanges. It looks pretty reasonable to me for the most part, but there is still a lot of uncertainty," said Vishnu Lekraj, an analyst at Morningstar.
Humana's number of exchange applications - 202,000 by January 31 - compares with the 400,000 people that competitor WellPoint Inc said it had signed up on the exchanges when it announced results last month. Both are in 14 states.
For 2014, Humana said it expected its total individual membership, which includes plans sold to people outside the exchanges, to be flat to up 100,000.
Besides health plans, Humana also provides dental, vision and other supplemental health and financial products. Most of its revenue comes from the sale of private Medicare plans.
Humana said that it still expected to spend 50 cents to 90 cents per share on investment and startup expenses for new state-based Medicaid contracts and the state-based insurance exchanges this year, affirming details it gave in January.
The company also backed its 2014 earnings outlook, also presented in January, of $7.25 to $7.75 per share, compared with $7.73 in 2013.
LOSS REFLECTS POLICYHOLDER COSTS
Humana reported a fourth-quarter loss of $30 million, or 19 cents per share, compared with year-earlier earnings of $192 million, or $1.19 per share.
Excluding the 99-cent-per-share expense, the company would have posted a profit of 80 cents per share. On that basis, analysts were expecting earnings of 94 cents, according to Thomson Reuters I/B/E/S.
Revenue rose to $10.19 billion from $9.56 billion as the company's individual and Medicare businesses signed up more people.
The company spent 85.8 percent of its policy premiums on benefits, up from 83.7 percent a year earlier, due primarily to the $243 million set aside to strengthen reserves in that closed block of long-term care policies that it took on in 2007 with the acquisition of KMG America.
Humana said it had adjusted the reserves to reflect policyholder longevity, increased in-home healthcare use and lower interest rates.
Humana said it is considering strategic alternatives for that business.
During the quarter, Humana said costs increased in its retail segment because of spending on the exchanges and Medicaid contracts as well as some higher marketing expenses for new Medicare products.
(Reporting by Caroline Humer; Editing by Lisa Von Ahn and Jan Paschal)