Humana (HUM) shares fell more than 12% on Thursday after the U.S. health insurance company reported that an increase in elderly patients seeking treatment will hurt its fourth-quarter results.
Humana reported preliminary numbers for the fourth quarter of 2023 (medical loss ratio of 91.4% versus expected 89.5%) ahead of its fourth quarter results on January 25th.
The medical loss ratio (MLR) is the difference between the medical premiums collected by an insurance company and the amount paid in claims. The Affordable Care Act requires companies to achieve an MLR of at least 80-85% each year.
Humana's report Thursday puts pressure on the company's stock and other Medicare Advantage insurers, including CVS (CVS) and United Healthcare (UNH), which have not yet released earnings.
Jared Holtz, a health care sector expert at Mizuho, said in a note Thursday that Humana's numbers are an extension of a post-pandemic trend that many expected had already faded.
“This is the most significant negative difference that we can recall, and it speaks to the fact that health care utilization remains higher than usual, especially among older populations across the country,” Holtz said.
“Ahead of (last) FY23, many believed that procedures that had been postponed/postponed due to the pandemic would slowly return, but eventually this activity would be resolved. “I guess so,” Holtz added.
Conversely, the news should boost medical device stocks because occupancy means more surgeries and other medical procedures, Holtz said.
JPM analysts said in a note Thursday that they expect other Medicare Advantage companies, such as Cigna (CI) and Centene (CNC), to be less affected given their lower market share.
Humana also predicted slower-than-expected growth, with annual membership growth of just 1.8%. JPM views this as a positive as it will help contain cost pressures due to higher utilization rates.
Anjalee Khemlani is a senior health reporter at Yahoo Finance, covering all areas of pharma, insurance, care services, digital health, PBM, and health policy and politics. Follow her on all social media platforms at Anjalee @AnjKhem.
