Humana completes sale of long-term care insurance policy business KMG, at a loss of $790 million

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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.”

 

How Medicaid Works, and Who It Covers

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One of the biggest flash points in the debate over Republican legislation to repeal and replace the Affordable Care Act is the future of Medicaid. Here are some basic facts about the 52-year-old program.

What is Medicaid?

It’s a public health insurance program largely for low-income people, though some middle-class disabled and elderly people also qualify. States and the federal government share the cost.

Whom does Medicaid cover?

■ Nearly one in five Americans, 74 million people, are on Medicaid.

■ Federal law guarantees Medicaid coverage to pregnant women, children, elderly and disabled people under certain income levels.

■ It covers more than a third of the nation’s children and pays for half of all births.

■ It also covers almost two-thirds of nursing home residents, including many who are middle class and spent of all their savings on care before becoming eligible.

States also have the option of covering other groups, like children and pregnant women whose household incomes are higher than the federal thresholds, or young adults up to age 26 who were once in foster care.

■ The Affordable Care Act allowed a new optional group: any adults with income up to 138 percent of the poverty level, which would be $16,643 for an individual this year. Thirty-one states now offer Medicaid to this group.

When was it created?

■ In 1965, as part of President Lyndon B. Johnson’s “Great Society.”

■ There was little political debate; the bigger fight was over creating Medicare, the program to cover the elderly, which Medicaid is often confused with.

Is Medicaid an entitlement
program?

Yes. Anyone who meets the eligibility rules has a right to Medicaid coverage, and for now, states are guaranteed open-ended financial support from the federal government.

How much does it cost?

■ Medicaid cost $553 billion in fiscal year 2016. Of that amount, $348.9 billion came from the federal government; the states paid $204.5 billion.

■ Medicaid accounts for 9 percent of federal domestic spending. For states, it is the biggest source of federal funding and the second-largest budget item, behind education.

The biggest costs in Medicaid are for the elderly and the disabled, often because of long-term care in nursing homes.

■ Washington pays 50 to 75 percent of Medicaid costs for most eligible groups, with poor states receiving more money.

■ Under the Affordable Care Act, the federal government initially covered all of the costs for the roughly 11 million people insured under the law’s expansion of Medicaid, who are largely adults without disabilities.

■ Under the law, Washington picks up 95 percent of state costs for the expansion of Medicaid this year, whittling down to 90 percent in 2020.

What changes are in store?

■ Both the House and Senate health bills would fundamentally change the way the federal government pays its share of Medicaid costs, setting a per-person limit on spending that would adjust annually for inflation.

■ The bills would also effectively end the Medicaid expansion, by sharply reducing how much the federal government pays for that population starting in 2020.

■ The result of these changes, according to independent analyses, would be major reductions in federal Medicaid spending over time.

■ Enrollment would drop, too, according to the nonpartisan Congressional Budget Office, with states making it harder to qualify for the program and getting rid of certain benefits to make up for tightened federal spending.

Long-term care insurance facing major pricing shift

https://www.washingtonpost.com/news/get-there/wp/2017/04/17/long-term-care-insurance-facing-major-pricing-shift/?utm_term=.44bd32bcb04a

One of the biggest fears people have about retirement is getting sick and running out of money to cover their health issues.

So in comes long-term care insurance, which can cover the cost of nursing homes, assisted-living facilities and in-home care. Medicare — except in very limited situations — does not cover long-term care. Medicaid covers long-term care, but to qualify for the benefit, you have to be pretty poor.

If you need help with life’s basic activities — eating, dressing and bathing — it can be expensive and the cost of that care can decimate your savings.

The problem is that there have been some steep premium increases for long-term care insurance, and it has many people wondering if the insurance is worth it. Insurance companies have had trouble pricing the insurance. Initial premiums charged haven’t been enough to cover claims.

But how the insurance is priced may be changing significantly. Rather than keeping premiums steady for several years and then having to impose huge double-digit rate hikes, Genworth, one of the largest providers of long-term care insurance, wants to be have the ability to change premiums annually, reports Forbes contributor Howard Gleckman.

“In this design, unfortunately called the Annual Rate Sufficiency Model, buyers of new policies would likely see modest, single-digit rate hikes each year or two,” Gleckman writes. “If Genworth thinks it is likely to pay fewer claims than expected or if investment income is higher than projected, consumers might even see small rate reductions in some years.”

He goes on: “For years, some brokers told buyers that their premiums would never increase. But in reality, while carriers could not raise rates on individual policies, they could boost prices for an entire class of buyers. They often delayed those rate hikes — or were blocked by state insurance commissioners — for five years or more, until policyholders got hammered with increases of 40 percent and up.”