Humana has completed the sale of its wholly-owned subsidiary KMG America Corporation, in a transaction first announced in November 2017.
Humana has owned KMG since 2007.
KMG subsidiary, Kanawha Insurance Company, offers commercial, long-term care insurance policies and currently serves an estimated 29,300 policyholders.
Humana sold its shares in KMG for a reported $2.4 billion to HC2 Holdings, which includes Continental General Insurance Company, based in Texas.
In its second quarter earnings statement, Humana reported a $790 million loss on the sale of KMG, which is expected to close during the third quarter.
Humana said it would no longer have plans in the commercial long-term care insurance business.
Humana instead is closing on two transactions to acquire an at-home provider in Kindred at Home and Curo Health Services, which specializes in hospice care, according to the Q2 report.
Curo provides hospice care in 22 states. Humana and a consortium of TPG Capital and Welsh, Carson, Anderson & Stowe, purchased Curo for $1.4 billion, Humana announced in April.
Humana will have a 40 percent interest.
Also, this past June, Humana partnered with Walgreens Boots Alliance in a pilot to operate senior-focused primary care clinics inside of two drug stores in the Kansas City, Missouri area.
Revenue remained strong for the insurer, which specializes in Medicare Advantage plans. Its MA business in Q2 realized both growth and lower utilization.
While revenue remained strong, Humana’s net income dropped to a reported $684 million this year compared to $1.8 billion last year.
The insurer benefitted from a lower tax rate year-over-year as a result of the tax reform law and negatively felt the return of health insurance tax in 2018.
“Our strong 2018 financial results are testimony to the underlying improvement in our operating metrics, like Net Promoter Score, digital self-service utilization and call transfer reduction, and to the growing effectiveness of our national and local clinical programs,” said Bruce D. Broussard, Humana’s CEO and president. “Also, we took another large step this quarter in helping our members, especially those living with chronic conditions, by beginning the integration of important clinical services through our investments in Kindred at Home and Curo, and through our partnership with Walgreens.”
Alphabet, the parent company of Google, is investing $375 million in Oscar Health, the technology-driven health insurer cofounded by Mario Schlosser and Joshua Kushner, brother of White House advisor Jared Kushner.
The funds will help move the New York City-based insurer into its next phase of expansion, entering the Medicare Advantage market.
“Today, we are announcing Alphabet’s plans to invest $375 million into Oscar Health,” said Mario Schlosser, co-founder and CEO of Oscar Health. “Oscar will accelerate the pursuit of its mission: to make our healthcare system work for consumers. We will continue to build a member experience that lowers costs and improves care, and to bring Oscar to more people — deepening our expansion into the individual and small business markets while entering a new business segment, Medicare Advantage, in 2020.”
Schlosser also announced the addition of Salar Kamangar to Oscar’s board. Kamangar is a senior executive at Google and former CEO of YouTube.
This is the second big investment for Oscar Health in less than a year. In March, Oscar raised $165 million from Alphabet, Founders Fund and other sources.
Numerous insurers have jumped into the MA market, finding there a growing population of aging baby boomers who are attracted to the plan’s additional benefits, such as dental and vision. About a third of Medicare beneficiaries have Medicare Advantage as their plan.
MA has seen strong earnings for insurers. UnitedHealth Group, Humana, Aetna, Cigna, Anthem, Centene and numerous Blue Cross Blue Shield plans are in the MA market, contracting with the federal government to offer the private plans.
Oscar is also in the Affordable Care Act market.
However, the insurer has struggled to turn a profit, according to Politico.
Schlosser and Kushner founded the company in 2012, saying the only way to fix the broken healthcare system is to empower the consumer.
Oscar uses data science and technology to do lower costs.
Sixty-three percent of member interactions with the healthcare system are virtual, the company said. More than 40 percent manage their health through the Oscar website and mobile apps. Forty-three percent of members’ first visits to the doctor are routed through Oscar.
In June, Oscar announced it had added three states, Florida, Arizona and Michigan, to the existing six where it has a footprint: California, Ohio, New York, New Jersey, Texas and Tennessee.
It added three additional large metro areas in Ohio, Tennessee and Texas for a total of 14 markets, 260,000 members and $1 billion in premiums.
“We are just trying to survive.”
So says the director of an Ohio federally qualified health center (FQHC) that, like many such clinics nationwide, struggles to meet the demand for a wide range of services, from prenatal and other preventive care to addiction treatment and oral health care.
Along with community hospitals and public health departments, FQHCs — critical providers of health services in many low-income communities — are funded through state and local taxes, federal and state government programs, and private philanthropy. But some FQHCs are experiencing shortfalls in trying to meet their clients’ needs. Threats from Congress to reduce federal Medicaid funding, scale back Medicaid expansion, and decrease funding for public health programs have further compounded the financial uncertainties.
To learn how funding shortfalls are being experienced on the ground, my colleagues and I spoke with hospital administrators, chiefs of emergency departments, directors of county public health departments, and heads of FQHCs and behavioral health clinics. We also interviewed community leaders connected to businesses, law enforcement, local media, religious organizations, and political groups in eight North Carolina, Ohio, Pennsylvania, and Wisconsin counties.
Nearly all of these community leaders described increasing access to health care as just one of three priorities for their communities. Improving local schools and attracting businesses with good-paying jobs are the other top concerns. As one school superintendent said, “We need to focus on all of these if we are to attract employers and people and remain a desirable place to live.”
But local health needs keep growing. The list is daunting: the decontamination of public water supplies; prenatal and infant care; immunizations; reductions in smoking and obesity; better nutrition; dental care for children and adults; and addressing mental illness, suicide risks, and substance use disorders. “We don’t have the capacity to deal with all who [need help],” says a Wisconsin county public health director. “We need to build infrastructure” — clinics and treatment centers — “and provider network capacity.”
Health departments and community clinics report that local funding has been inadequate for some time. As state and county governments have resisted raising taxes and increasing funds for public health needs and community clinics, grants from local organizations and foundations have helped fill the breach. But private philanthropy only goes so far. “Local foundations do not want to fund long-term staff needs,” one public health director said.
Threats to Medicaid funding have community providers worried. Medicaid generally provides about half the revenues for FQHCs, enabling them to provide care to all, regardless of ability to pay. FQHC directors fear that changes to eligibility — including requirements that beneficiaries work or volunteer, as proposed under various waivers — could mean that some patients will lose coverage, along with their access to counseling and medications for mental illness or chronic conditions like diabetes. Medicaid cutbacks also could make it harder for FQHCs to find specialists willing to see their uninsured or underinsured patients.
Hospital emergency departments (EDs) also would suffer from cuts to Medicaid. “Medicaid and self-pay [patients are] now 40 percent of our revenue, compared to 20 percent before Medicaid was expanded,” one ED chief told us. While more patients are covered thanks to the expansion, ED revenue from private insurance in these communities is down over the past two years, making hospitals more dependent on public insurance. ED chiefs also say that people with mental illnesses or substance use disorders experiencing crises are already crowding EDs, in part because it’s often easier for Medicaid beneficiaries to get to the hospital than to find primary care providers willing to treat them in a timely manner. If Medicaid funding is cut or eligibility requirements are changed, such problems could become much worse.
Medicaid Changes Already Impacting Providers
Complicating matters is a 2016 rule issued by the Centers for Medicare and Medicaid Services that was intended to improve quality of care and oversight for the growing number of Medicaid beneficiaries enrolled in managed care. Some states are responding to the rule by requiring that FQHCs and other safety-net clinics use more complex coding to file their claims for reimbursement, adding to the administrative burden on clinics. “We used to use just 15 codes to bill for services,” the director of a behavioral health clinic said. “Now there are about 250, and I’ve had to hire more administrative staff.”
Moreover, some clinics have seen longer gaps between the time claims are submitted and reimbursement is received from the state. The resulting cash flow problems hit smaller clinics, which have narrow operating margins, particularly hard. “This [delay] is causing smaller clinics to live in their ‘line of [bank] credit’,” one clinic director said. “Does the state want to deal only with large provider agencies?”
These ongoing changes to Medicaid payment, along with proposed eligibility changes and fears of funding cutbacks, are causing grave concerns among community health leaders. With needs for care growing, they are understandably focused on the present. Otherwise, as one clinic director said, “[we] would be paralyzed by unease about the future.”
In the counties we visited, local independent political groups that have sprung up in response to these and other concerns see the federal government as out of touch with local needs for better health care, better schools, and higher-paying jobs — and with communities’ inability to dig deeper into their pockets to address these needs. For the clinics and hospitals that serve Medicaid patients and their communities, stable Medicaid funding will be critical to meeting their missions.