Humana stock falls after reporting higher costs, dragging down other Medicare Advantage providers
Humana (HUM) stock tumbled more than 12% on Thursday after the US health insurer reported an increase in older patients seeking care, which would hurt its fourth quarter results.
Humana reported the preliminary 2023 fourth quarter numbers — 91.4% medical loss ratio, compared to an 89.5% expected — ahead of its fourth quarter earnings on Jan. 25.
Medical loss ratio (MLR) is the delta of medical premiums an insurer collects and the amount paid out in claims. The Affordable Care Act mandates that companies have an MLR of at least 80-85% each year.
The report from Humana is pressuring its stock and other Medicare Advantage insurers Thursday, including CVS (CVS) and United Healthcare (UNH), which have yet to report earnings.
Mizuho healthcare sector specialist Jared Holz said in a note Thursday that Humana's numbers are extending a post-pandemic trend that many expected would have waned by now.
"This is the most significant negative variance we can recall and speaks to the still higher than usual healthcare utilization environment particularly among the older population(s) across the country," Holz said.
"Headed into FY23 (last year) many believed that procedures that had been deferred/delayed as a result of the pandemic would come back slowly, but eventually this activity would dissipate," Holz added.
On the flip side, the news should boost medical devices stocks, as the utilization rates mean more surgeries and other medical procedures, Holz said.
JPM analysts said in a note Thursday they expect that other Medicare Advantage players like Cigna (CI) and Centene (CNC) won't be impacted as much, based on their lower market share.
Humana also indicated it would grow more slowly than expected, with an increase of only 1.8% in membership for the year. JPM views this as a positive as it will help curb cost pressures from the higher utilization rates.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
