The government is still paying Humana (NYSE:HUM) to take care of seniors. For now.

The health insurer posted a whopping 35% rise in earnings per share in the second quarter, thanks to a pretty awful quarter last year, when the company miscalculated its Medicare prescription drug costs. Even still, it was a nice quarter for Humana, with enrollment in its Medicare Advantage programs up 12% year over year.

The company's smaller commercial business didn't fare quite as well. Membership was down 3% year over year because of rising unemployment and the loss of two large accounts. The medical expense ratio -- percent of premiums paid out as claims -- improved by 20 basis points, so at least the segment is headed in the right direction and could improve once the economy rebounds.

But remember, Medicare -- not its commercial business -- will drive Humana's future, and investors don't think that Humana will be able to grow earnings in the years ahead. Look how it trades compared with its peers:

Company

2009 EPS guidance

2009 Forward P/E**

Humana

$6.10-$6.20*

5.5

UnitedHealth Group (NYSE:UNH)

$3.00-$3.15

8.9

Cigna (NYSE:CI)

$3.80-$4.00*

7.2

Aetna (NYSE:AET)

$2.75-$2.90

9.5

Coventry Health Care (NYSE:CVH)

$1.85-$1.95*

12.0

WellPoint (NYSE:WLP)

$5.60-5.66*

9.5

Source: Company press releases
*Adjusted. **Based on guidance midpoint.

Sure, there's plenty of worry about how a government-sponsored plan might affect insurers' commercial businesses; single-digit P/Es were unheard of a few years ago. But the bigger issue for Humana is how much the government will cut Medicare Advantage payments.

The market tends to overreact to uncertainty, so Humana may not be as bad off as it appears. Still, investors would be wise to keep Humana to a small fraction of their portfolio. As investors in General Motors and Fannie Mae (NYSE:FNM) know, when the government gets involved, it's easy to get stuck holding a value trap.

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UnitedHealth and WellPoint are Motley Fool Inside Value recommendations. If you're interested in picking through the market wreckage for possible turnaround candidates, you should have the Inside Value team on your side. Check it out for free with a 30-day trial.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Coventry Health Care and UnitedHealth are Stock Advisor picks. The Fool owns shares of UnitedHealth and has a disclosure policy.