Signage is displayed on a Humana Inc. office constructing in Louisville, Kentucky, U.S., on Sunday, Feb. 3, 2019. Humana is scheduled to release earnings figures on February 6. Photographer: Luke Sharrett/Bloomberg via Getty Images
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Shares of Humana plummeted on Thursday after the health insurer issued dismal full-year earnings guidance, citing soaring medical costs which are dogging the broader insurance industry.
Those expenses have spiked as an increasing variety of older adults return to hospitals to undergo procedures that they had delayed in the course of the pandemic, comparable to joint and hip replacements.
Humana, which primarily provides government-backed insurance through the Medicare Advantage program, expects adjusted earnings of about $16 per share for 2024. That is a little bit greater than half of the $29.10 per share that analysts expected, in accordance with LSEG, formerly generally known as Refinitiv.
The guidance adds to Wall Street’s concerns about medical health insurance company profits falling as medical costs jump. UnitedHealth on Friday also reported its own jump in medical costs, though it was less extreme than Humana’s.
Humana shares plunged greater than 10% on Thursday.
Its forecast dragged down other medical health insurance stocks. Shares of each UnitedHealth and CVS Health fell greater than 6% and 4%, respectively. Cigna’s stock and Centene shares each slid about 4%.
Elevance Health also fell 2% on Thursday. But unlike Humana, the insurer forecast 2024 earnings above estimates on Wednesday, after higher premiums in its industrial business helped control medical costs within the fourth quarter.
Expectations for Humana’s 2024 earnings guidance were already low after the corporate warned last week that medical costs were running higher than expected within the fourth quarter. It signaled that higher expenses could cut into its profits within the yr ahead.
Humana confirmed that pessimism on Thursday. It reported a medical profit ratio – the share of payout on claims compared with premiums – of 90.7% for the fourth quarter. Analysts had estimated that the ratio could be 89.7% for the period, in accordance with LSEG.
The insurer cited a rise in outpatient services, comparable to orthopedic surgeries, and a swell in inpatient care in November and December amongst patients enrolled in Medicare Advantage.
Medicare Advantage plans are privately run versions of the federal government’s Medicare program, mostly for people age 65 and older. Those plans are one in every of Humana’s biggest types of coverage outside insurance it provides for military families and retirees.
Humana posted fourth-quarter revenue of $26.46 billion, which beat analysts’ estimate of $25.42 billion, according LSEG data.
But the corporate posted a lack of $591 million, or $4.42 per share, within the fourth quarter. That compares with a lack of $71 million, or 12 cents per share, in the course of the same period a yr ago.
Excluding certain items, Humana reported a lack of 11 cents per share. Analysts had expected the corporate to post earnings of 15 cents per share, in accordance with LSEG.
