Income making the most from the Medicare business....and projecting earnings in 2008 to be around 5.30 to 5.50 per share..up from the average of 5.19 estimates...interesting comment from the article stating they don't have "a great commercial business". thus the need to maximize the Medicare portion...BD 

Oct. 29 (Bloomberg) -- Humana Inc., the second-largest provider of U.S.-sponsored health plans, said earnings rose 90 percent, and raised its 2007 forecast after gaining customers for its most-profitable managed-care programs. Humana jumped the most in more than three months in New York trading. Third-quarter net income climbed to $302.4 million, or $1.78 a share, from $159.2 million, or 95 cents, a year earlier, Louisville, Kentucky-based Humana said today. Profit excluding some items beat analysts' estimates, as did revenue.

Medicare Advantage plans generate annual gross margins of about $1,650 per Humana beneficiary, more than 10 times as much as the profit from the company's drug plans for the elderly, McDonald said. Gross margin is revenue minus the cost of goods or services sold.

Consumer groups and members of Congress have criticized Humana and other insurers for misleading some elderly people into signing up for Medicare Advantage plans, and they support efforts to scale back payments.  America's Health Insurance Plans, a trade group based in Washington, has urged Congress to leave the rates alone. Last week it brought 350 Advantage members to Capitol Hill from across the U.S. to urge lawmakers to back off.

``They don't have a great commercial business, so you have to make the most of your Medicare business,'' said Matt Perry, an analyst with Wachovia Securities in New York. ``It's been very good for the past few years and continues to be good.''  Revenue rose to $6.32 billion, surpassing analyst expectations of $6.11 billion U.S.

Humana's bigger-than-expected profit was driven by its lucrative, but controversial, Medicare Advantage program, which Congress recently criticized for receiving overpayments.  The company's better-than-expected quarter was driven by higher enrollment in its Medicare program.

Related story from Forbes

Executives from Humana and United Health said their companies pass overpayments through to seniors in the form of extra benefits, as required by law.

Medicare officials said they did not attempt to recover the money because they lack legal authority to do so, although GAO disputed the claim.

Lawmakers Probe Overpayments


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