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BLUE CHIP 25 - June 2006
But Humana’s latest incarnation – what some see as the company’s most promising yet – is as a major provider of Medicare Part D and managed-care plans. That’s on top of its commercial health plans for individuals, companies and governmental organizations in 46 states. The Medicare makeover comes at the hands of President and CEO Michael B. McCallister, a 32-year veteran of the company who has turned the health insurance industry on its ear by listening to customers and providing as much information as possible so consumers can make informed decisions about their own care. “We are in the process of the greatest organic business expansion in American industry, especially for a company of our scale,” McCallister said in a recent telephone interview. “We’ve been through large transitions in the past; this is just another chapter in our history.” Humana has grown to nearly 19,000 employees, about 8,000 of whom are in Kentucky, which has the largest concentration of employees. The state is also its largest commercial market, accounting for about 700,000 customers of the total 3.3 million commercial membership base. The company began preparing for the Medicare Part D drug-plan market in the spring of 2005, and began selling one product in the summer of 2005. Overall, Humana invested more than $80 million in 2005 and hired more than 2,500 associates to ramp up for the Medicare business. The company leased office space in Louisville, Northern Kentucky and Tampa to house the additional staff. Humana expected to sign up about 2.7 million Medicare members through the enrollment period from November 2005 through May 15, 2006. That rapid expansion has had its initial costs. Profits for the three months ended March 31 fell 22 percent compared to the same quarter in 2005, a drop McCallister attributed in part to the marketing, sales and service costs that come with launching the drug plans. He said the gains from the new business would far outweigh the price. A storied journey McCallister took over in 1999 with a plan to grow the company through new products and better service, with a few strategic acquisitions to fill in gaps in geographic or product offerings. “Historically Humana’s commercial concentration has been in the population centers, the Golden Triangle of Northern Kentucky, Lexington and Louisville,” said Jeff Bringardner, president of Humana’s commercial operations in Kentucky. “With the addition of the Commonwealth account with employees in all 120 counties as well as collar counties outside the commonwealth and the addition of CHA, we have strengthened our competitive position throughout the commonwealth.” Humana is the nation’s fifth-largest health insurer, but will likely end up second in the number of Medicare drug-plan customers, due in large part to its aggressive pricing strategies and innovative marketing partnerships with Wal-Mart, USAA and State Farm. The company has pursued the Medicare Part D drug plan business aggressively to establish relationships to sell the complete managed care plans called Medicare Advantage, which are operated by the private insurers but subsidized by Medicare. The Medicare managed-care plans cover doctor and hospital bills as well as drugs. “We want to establish relationships that last a long time,” McCallister said. “We know that seniors tend to be relatively loyal to companies that they get good products and services from. It’s an opportunity for us to have a large number of customers for very long period of time.” Humana has been on the forefront of “consumerism” in the health insurance industry, which focuses on giving consumers more information and more choices about their healthcare plans. To develop new products, Humana surveys customers and uses its employees as test markets for new services. The company has hired ethnographers to follow customers throughout their day, analyzing how people gather and act on information to better communicate the intricacies of healthcare plans. Scientists are building predictive models, so that a computer program will identify a person who appears to be at risk for a health problem and recommend treatments or dietary changes. Humana members can also go online and compare the cost of drugs and certain tests and procedures, such as a MRI. Wall Street has looked favorably on Humana’s aggressive transformation and high expectations for the future. “Humana has made a clear statement that Medicare will be their main business for the foreseeable future. They’ve built the infrastructure and now they have to execute their strategy,” said Carl McDonald, managed care analyst for CIBC World Markets. “Most of Humana’s profitability comes from government business and it’s been a fairly beneficial thing.”
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Copyright 1996-2006, by Kentucky Business Online. All rights reserved. Editorial content
is copyright 2006, Lane Communications Group The Lane Report is a trademark of Lane Communications Group. All other trademarks are the property of their respective owners. |
These days, the folks at Humana’s Louisville headquarters are busy – really busy. That will happen when a corporation redefines itself. In its 45-year history, the health insurance giant has tested the waters in both the nursing home and hospital businesses. It’s no stranger to self-reshaping itself, a quality that’s brought the company through tough times to become Kentucky’s largest public corporation, at least when measured by revenues.
In January, Humana began administering the Kentucky Commonwealth account that added about 230,000 new members, and completed the takeover of CHA health plan in Lexington, adding about 92,500 members.