4 things to know about why the Humana layoffs are happening now
Grace Schneider, Louisville Courier Journal Published 11:58 a.m. ET Nov. 7, 2017
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Humana's announcement Monday that it would layoff 1,300 employees company-wide might have shocked many employees and business leaders in the health insurer's hometown, particularly when the company has been on an earnings roll.
But look a little deeper, as analysts covering the industry have for months, and it's clear that Humana has been preparing for tougher challenges ahead in 2018 despite a healthy forecast for Medicaid Advantage, its core business.
Layoffs: Humana to lay off 1,300 workers, will let employees know about jobs by end of the week
Here are some perspectives on the state of the company and the timing of the payroll trimming:
It's all happening before third-quarter earnings are released.
The layoffs and separate buyouts for 1,150 senior employees, a total of 2,450 people, come two days before the company releases third earnings on Wednesday morning. Humana also announced it had sold the stock of its wholly-owned subsidiary, KMG America Corp, a commercial long-term care insurance business serving over 30,000 policyholders, to a Texas company for a projected net loss of $400 million.
It all points to more shedding of costs and fashioning a strategy that can withstand what's expected to be more cuts in reimbursements and fewer write-offs for large insurers. Telling the markets about the course correction ahead for next year is standard practice now.
Humana job cuts:: Which employees qualify for a buyout offer?
What about Louisville jobs?
At last count, Humana had 12,500 workers and more than 50,000 nationwide. How many of the 1,300 layoffs and 1,150 buyouts are coming in Louisville? Spokeswoman Kate Marx said Tuesday morning that those numbers can't be disclosed per federal restrictions on discussing the financial details before the earnings release Wednesday.
"We're in a quiet period before earnings," Marx said in an email.
There's this fee...
Analysts who watch the numbers closely have been predicting for a few months that Humana may be looking at drastically trimming payroll in the face of stiffer headwinds in the post-health care reform world. Humana has been saying that it expects to continue growing margins and providing the same or better benefits to policyholders in 2018 — despite facing an estimated $700 million in additional costs from a health insurance fee that was temporarily suspended in 2017.
In July, CNBC reported that all big insurers, including Humana, were temporarily insulated by having the fee suspended, but the end of the what's known as Obamacare by the Republicans is also going to cost heavily.
Humana's future: With $37B Aetna deal off, Humana will listen to other offers
Earlier this year: Humana to cut jobs, offer early retirement packages to some employees
What does this mean for the future?
Humana isn't Louisville's biggest employer. UPS is. But the health insurance giant has had the city's largest payroll because of its many great paying jobs in IT, marketing and dozens of other roles. Other big layoffs in the past have been followed later with new investments and a ramp-up in employment. That's expected to remain the case as long as Humana doesn't become some other company's wholly-owned subsidiary.
Reporter Grace Schneider can be reached at 502-582-4082 or gschneider@courier-journal.com.