Humana says profit fell on health reform, drug costs

[July 30, 2014] (Reuters) - U.S. health insurer Humana Inc said on Wednesday that second-quarter profit fell due to investments in the exchanges created under President Barack Obama's healthcare reform law as well as costly new hepatitis C drug treatments.

Humana said membership growth and a lower share count due to stock buybacks had helped offset some of the new costs.

The company said net income fell to $344 million, or $2.19 per share, from $420 million, or $2.63 a share, a year earlier. That was in line with analysts' estimates.

Most of Humana's revenue is from Medicare Advantage and Medicare Part D, the privately run medical and drug plans under the government health program for older people and the disabled. Humana said revenue rose 18 percent to $12.2 billion. Both Medicare Advantage and Medicare Part D added new customers, and the company's individual customer base increased 122 percent to more than 1.1 million members.

The company's medical benefit expense ratio, or the percentage of premiums spent on medical services, fell to 83.1 percent from 83.4 percent.

Higher ratios in the retail and employer group, due in part to the expense of a new breakthrough drug for hepatitis C from Gilead Sciences Inc, were offset overall by exiting the Puerto Rico Medicaid business, Humana said.

(Reporting by Caroline Humer; Editing by Lisa Von Ahn)

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