Humana Inc. shares
HUM,
dropped 11% Thursday morning after the giant health insurer slashed its full-year 2023 earnings guidance and flagged rising medical costs and slower than expected 2024 Medicare Advantage enrollment growth.
The company now expects to report full-year 2023 earnings per share of $20.00, down from its November guidance of at least $26.31 per share, and adjusted earnings per share of $26.09, compared with previous guidance of at least $28.25.
The news dragged down stocks of other major players in the Medicare Advantage market early Thursday, as shares of UnitedHealth Group Inc.
UNH,
Cigna Group
CI,
Elevance Health Inc.
ELV,
and CVS Health Corp.
CVS,
dropped 1% to 4%.
UnitedHealth shares also tumbled last week after the company reported rising medical costs relative to premium revenue in the fourth quarter.
Humana said in a regulatory filing Thursday that higher inpatient care costs, along with outpatient surgeries, supplemental benefits and other factors are driving up Medicare Advantage medical costs. The company said it hasn’t been able to offset those expenses with administrative cost cuts and productivity improvements “due to the recency and significance of the latest emerging trends.”
For 2024, Humana said it now expects Medicare Advantage growth of about 100,000 members, representing a 1.8% increase over its 5.4 million members at year-end 2023. The company said its “balanced approach to pricing” resulted in a lower share of overall industry growth.
“The company continues to believe it took a prudent approach to 2024 pricing considering the current regulatory changes and evolving utilization environment,” Humana said in its filing.
Humana will now be hard pressed to hit its 2024 adjusted earnings per share target, Mizuho Securities analyst Ann Hynes wrote in a report Thursday.
On the flip side, Hynes wrote, the news of higher healthcare utilization looks positive for hospital stocks like HCA Healthcare Inc.
HCA,
Tenet Healthcare Corp.
THC,
and Universal Health Services Inc.
UHS,
Those stocks were up 0.5% to 2% Thursday morning.
Humana shares early Thursday were headed for their lowest closing level in nearly two years. The stock is down 2.2% in the year to date, while the S&P 500
SPX
is down 0.6%.
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