Humana, scale and admin costs

Charles Gaba has a round-up of the  states where Humana  is pulling out of the individual markets in some states:



There are a fewof points to make.  The biggest loss is in Alabama as that is down to a single issuer state.  Situations like this is when a public option would have been extremely valuable as a means of keeping an insurer honest.

Next, excluding Alabama, most of the policies being terminated are either off-Exchange or grandmothered/grandfathered policies that were never ACA compliant.  The transitional plans were either live before PPACA was signed or sold between 2010 and 2013 and their lives extended as part of the “If you like it, you keep it” tempest in a teapot.

The final point is that size matters.

Being an insurer covering only a couple thousand lives on a commercial market with strict MLR restrictions is tough.

I quipped on Twitter last night that if I worked for Humana in my old position where I had QHP compliance responsibilities, my salary would have eaten up a decent fraction of the allowable administrative costs in a few states.  My work in my previous position minimally scaled with enrollment.  Large membership pools spread my costs out from being dollars per member per month (PMPM) to nickels PMPM as I had to do roughly the same amount of work to get a new plan approved that we sold to seven members or an approved plan that we sold to 72,000 members.  This is especially true on the grandfathered and grandmothered policies that Humana is phasing out as those policies have lower premiums because the people are healthier as they were medically underwritten out of the general pool and into the grandparent policies.  Compliance costs including future plan year qualification costs for Humana in Kansas and Virginia would have been very high as a proportion of total revenue.

Alabama is the bad news from a policy perspective.  Everything else is effectively background noise.  The important questions is what does Humana do in the states where they have significant membership (excluding Alabama).  If they stay in most of those states while cutting lose states with under 10,000 members then this is a mild course change.  If they pull out of states where they have 30,000, 40,000, 50,000 or more members than that news is far more valuable and disturbing.

31 replies
  1. 1
    DCF says:

    Bernie Sanders’ Health Care Plan Just Picked Up Support from 2,000 Leading Physicians
    Zach Cartwright | May 5, 2016

    2,000 doctors say Bernie Sanders has the right approach to health care
    By Carolyn Y. Johnson May 5 at 1:10 PM

  2. 2
    D58826 says:

    @DCF: Stop beating a dead horse.
    1. Hillary won
    2. let the 2k doctors and all of the other Bernieiacs organize and get a Congress elected that will pass Bernie’s plan whither it is Hillary or Bernie in the WH. He doesn’t have a magic wand to just implement single payer.
    3. He pushed his ideas during the debate on Obamacare. By and large he lost. His ideas did not have the votes.

  3. 3
    eclare says:

    I’m on a Humana plan in TN through the exchange. Have you heard any rumors?

  4. 4

    @eclare: Humana is “sticking around in Tennessee next year” according to info on Gaba’s site. Follow the link at the top of Richard’s post.

  5. 5
    eclare says:

    @Kristine Smith: Thanks! Although I assume that is always subject to change.

    ETA: followed the link, looks like they will be here next year, just didn’t read far enough before.

  6. 6
    MomSense says:


    He could also ask his supporters in every non-expansion state to organize for Medicaid expansion. That would help millions of people who need help the most.

  7. 7
    satby says:

    @D58826: @MomSense: Both of these. Work on helping people TODAY, not some gauzy distant future.

  8. 8
    D58826 says:

    @MomSense: yep. elections have consequences. Even in 2009 that meant there were not enough progressive votes to pass the public option let alone single payer. Flip the red states deep blue then we can talk.

    I suspect I will bring down the wrath of the Bernie folks but at the moment there are not enough progressives in the country to pass Bernie’s program. Facts are hard things but they are facts. A Sen. Warren type candidate will not win a Senate seat in red state America any time soon. That’s just the way it is. The best we can hope for, at least in the near future, is a former Sen. Landriu type winning in red states. She won’t pass the purity pony test of the most fervent progressives but she did give Harry the leadership and was one of the 60 that got Obamacare past. Is that the best of all possible worlds in my opinion – no, but it is a real world compromise that I am willing to live with. The alternative at this point is Ryan, McConnell and even the most ‘reasonable’ of the 17 GOP candidates (Bush/Kaisch) in the WH voting to repeal Obamacare.

    It doesn’t mean to stop trying and throw up our hands in defeat but we can’t let the perfect become the enemy of the good enough

  9. 9
    MomSense says:


    As long as the Hyde Amendment is in effect, single payer Medicare for all will mean a loss of important services for women. It might seem unpossible to a Sanders supporter but women would not benefit from the loss of reproductive health coverage.

    There are other issues with his Medicare plan beyond the huge tax increases, Ryanesque modeling in terms of funding and GDP projections that are supposed to magically happen. This is Medicare without any discernible type of cost controls. And I don’t trust Republicans not to threaten Medicare funding constantly. At least with a regulated private insurer model, there are several layers of protection from massive budget cuts.

  10. 10
    MomSense says:


    Honestly I think the goal is to destroy the system not help people.

  11. 11
    D58826 says:

    @MomSense: Until I read some of Richards posts I was in favor of single payer. Now I’m not so sure. There was/is a lot of resistance to Obamacare and it did not affect, in any material way, the 80% with employer based health care. While it may have affected the bottom line of doctors, hospitals, etc it didn’t seem to do so in a massive way. Going to single payer in one jump will be a major major disruption to 17% of the GDP and most of the people in the country. It is never going to happen. We can make incremental changes to Obamacare and Medicare that move in that direction but even that will take years and a change in Congress. One reform is we can give the government greater power to regulate drug prices, esp medicare part d.

  12. 12
    D58826 says:

    @MomSense: I keep reading articles about Sander’s career and beliefs and i think he does want to do good and help people. I just think that he views the world thru an old time socialist (maybe a bit marxist) lens that say capitalism is evil and must be replaced with something better i.e. his version of socialism. I think he would want to break up the big banks if they were half the size and 2008 had not happened. It is just his world view. He isn’t ‘evil’ and he may be right in his analysis of what is wrong with the economy; but the vast majority of Americans don’t buy it. .

  13. 13
    Richard Mayhew says:

    @D58826: The big problem with single payer in the United States from a technical/program design point of view is the transition. Most people, most of the time, aren’t particularly worried about health insurance because they are some combination of healthy or covered by good to very good insurance (although total cost is too high). The people who get screwed by the current system and who were getting screwed under the pre-PPACA system aren’t that big of a group and even worse, their political power is smaller than their numbers.

    So the political-policy-plumbing challenge is getting the people who are getting screwed into a better position without visibly taking away much if anything from the people who are in a good position today.

    Good luck with that…. there are better ways to get to universal coverage than a complete rebuild of the US social contract and social welfare state.

  14. 14
    NotMax says:

    Would likely have turned a blind eye to one or the other, but reading both grammatical stumbles so close upon one another brings out the inner editor/schoolmarm (sorry ’bout that).

    There are a couple of points to make.

    You then provide three points, one more than a couple.


    *shudders* Try substituting another number to hear how bizarre that common faux pas sounds. Seventhly or thirty-fouthly, for example; avoid the -ly suffix in for numerals.

    More to the topic, would also appreciate if you could provide an explanation, within the context of the insurance business, of what distinction there may be between grandfathered and grandmothered policies, the latter being a new one for this old coot.

  15. 15
    NobodySpecial says:

    My sister has Humana in Illinois, and the network is so screwy that she got motored off to Schaumberg an hour away when there’s an in-network hospital available 15 minutes from my house when they decided to do a hysterectomy.

  16. 16

    @NotMax: tweaked and GM/GF explained

  17. 17
    FlipYrWhig says:

    @D58826: Bernie Sanders and his fans have this enormous problem of not really realizing that there’s a difference between having a great idea about how to do something and the actual doing of the thing when not enough people share your great idea. And they show no sign that the “Eureka!” moment will arrive anytime soon.

    Apropos Seinfeld reference:

    George: Anyway, as I was lying in the puddle, I think I may have found a way for us to get Bonds and Griffey, and we wouldn’t have to give up that much.

    Steinbrenner: Well, don’t tell it to me George, tell it to the new Assistant to the General Manager.

    George: I didn’t get the job?

  18. 18
    D58826 says:

    @Richard Mayhew: Yep. From reading your posts on the subject I had come to the same conclusion.. And from a purely human point of view for the vast majority of folks as long as the health plan isn’t a big bite in the pay check or a hassle when they are healthy, they don’t really care what the plan is called when they are wheeled into the ER with chest pains. They just want the bill paid.

  19. 19
    FlipYrWhig says:

    @D58826: And they don’t want to feel like they’re paying for someone else’s bill, either.

  20. 20
    liberal says:


    Until I read some of Richards posts I was in favor of single payer. Now I’m not so sure.

    LOL. Are you even aware how he makes money? Of course he’s going to diss single payer.

  21. 21
    liberal says:

    @Richard Mayhew: Yawn. There’s also the fact that having an atomized system of health insurance is a pain in the ass, not just for providers but also for patients: more paperwork for all.

    If you want to argue the whole “politics of the possible” thing, that’s fine, but the fact is that you’d have to be insane to think that having multiple, highly regulated private insurers is in any rational sense to be preferred to single payer.

  22. 22
    FlipYrWhig says:

    @liberal: I mean, no one ever criticizes how their own profession works.

  23. 23
    liberal says:

    @D58826: You’re out of your goddamn mind. We have socialism for banks, at least the TBTF ones. Only for the losses, though.

  24. 24

    @liberal: 2 comments.

    Single payer or universal coverage — which goal is more important to you? Single payer is neither necessary nor sufficient for universal coverage. My preference is universal coverage which means working within the American political framework and acknowledging massive path dependencies and interest groups involved in the system as it is and as it could be modified.

    As I have stated before, in the past year when I have not been looking for work, I’ve been interviewed and head hunted half a dozen times for jobs. Four of those positions would be out of the health insurance field. I would not worry to much about my family’s economic security if single payer was implemented by Alien Space Bats tomorrow.

    Secondly, it is very easy for me to read into your statements in this thread that anyone who has functional knowledge must, by definition, be corrupted by the system and therefore can not be trusted. Is that the argument you are insinuating?

  25. 25
    sinnedbackwards says:

    We lived in Kentucky 20 years ago or so when Harry Moberly, an MD and state senator, sponsored and got passed a state sponsored health plan designed to be a template for universal coverage. All state, county and municipal employees, retirees, and Medicaid recipients were bundled into a package of care recipients, and insurance companies were invited to bid. The intention was to get group rates that could then be extended to small businesses and individuals.

    No insurance company would bid. NONE. Humana, based in Louisville, led the resistance. I have hated them with a burning passion ever since.

    I don’t know as many details, but a similar program in by-god Tennesee (TennCare) died a similar death.

    We could not have a Saskatchewan model because the insurance companies would not play.

    Also, for those who say Bernie hasn’t done squat in all these years, he and Ben Cardin from Maryland successfully added $20 billion or so to the ACA to support community health centers in amenable localities. I think Lexington has set up 5 or 6. Again, it’s sort of a template for showing how a single payer/provider system might work. (I’m still a Hillariac though.)

  26. 26
    ruemara says:

    @Richard Mayhew: that second argument is what they’re always insinuating.

  27. 27
    Steve LaBonne says:

    @liberal: Then most of the developed countries are full of insane people, since single payer systems are the exception rather than the rule.

  28. 28
    Richard Mayhew says:

    @Steve LaBonne: don’t bring facts to the Gnostic’s Truthiness and Revelations, mean reality seeker

  29. 29
    wenchacha says:

    @MomSense: As long as the Hyde Amendment is in effect, single payer Medicare for all will mean a loss of important services for women.

    How long do we have to continue honoring an amendment forced upon us by a serial child rapist?

  30. 30
    MomSense says:


    Are you confusing Hyde with Hastert?

  31. 31
    wenchacha says:

    @MomSense- Yes, I am. But I dislike Hyde as well. And I don’t think he was without sin.

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