Second-quarter net income dipped to $209.9 million, down from $216.9 million in the year-ago period. Still, the insurer’s profits were better than analysts’ estimates, leading the insure to increase its projected earnings for 2008.
After underestimating the cost of serving new customers in Medicare drug plans, in March Humana trimmed its full-year earnings goals by 25 percent. The error resulted in the company’s operating loss of about $50 million for its drug plan business in the second quarter from a $95 million operating profit a year earlier, said Carl McDonald, an analyst with Oppenheimer & Co. in New York.
"It was a totally human error in the pricing of the product,'' notes McDonald, who says there’s “really nothing they can do about it until 2009.”
Humana covers 7.96 million enrollees in Medicare drug and health plans for seniors and those who are disabled; Medicaid programs for low-income people; and Tricare coverage for military personnel, families and retirees.