United, Humana may lose Medicare members

By Bloomberg News

Last update: September 28, 2007 - 7:54 PM

UnitedHealth Group Inc. and Humana Inc., the two largest U.S. providers of Medicare drug plans for the elderly, may lose a combined 1 million low-income enrollees next year.

UnitedHealth's prices exceeded Medicare benchmarks in 18 of the program's 34 regional markets. As a result, 650,000 UnitedHealth drug-plan members can't automatically renew, the company said in a prepared statement this week. Humana could lose 500,000 enrollees, analysts said.

Greg Nersessian of Credit Suisse said the enrollment loss will cost UnitedHealth 2 cents per share next year.

"We are shocked," Nersessian wrote Friday in a note to clients. "In fact, we would have been very surprised had UnitedHealth missed the benchmark in one region, much less 18 out of the 34."

UnitedHealth, based in Minnetonka, and Humana, based in Louisville, Ky., both raised drug-plan premiums paid by the U.S. on behalf of low-income members in Medicare, the health program for the elderly and disabled, and Medicaid, the state-run insurance plans for the poor.

The expected enrollment losses may not be a bad thing, said Peter Costa, an analyst with FTN Midwest Securities Corp. in Boston.

"These plans may well benefit from slightly higher rates, despite losing some low-income members," Costa said. "We do not believe the Part D low-income members are a sustainable business regardless of this year's winners."

The Medicare drug-insurance program was introduced in 2006 to help the elderly pay for prescription drugs.

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