A Humana Inc. office building. in Louisville, Kentucky, February 3, 2019.
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Shares of Humana plummeted Thursday after the health insurance debacle full year earnings guidanceciting rising medical costs burdening the broader insurance industry.
Those costs have skyrocketed as a growing number of seniors return to hospitals for procedures that were delayed during the pandemic, such as joint and hip replacements.
Humana, which primarily provides government insurance through its Medicare Advantage program, said it expects adjusted earnings of about $16 a share for 2024. That’s a little more than half of the $29.10 a share analysts were expecting, according to LSEG, formerly known as Refinitiv.
The guidance adds to Wall Street’s concerns about health insurers’ profits shrinking as medical costs rise. UnitedHealth on Friday he also reported his jump in medical expenses, although it was less extreme than Humana’s.
Humana shares closed 10% lower on Thursday.
Her prediction dragged down other health insurance stocks. Shares of both UnitedHealth and CVS Health closed about 4% and 3% lower, respectively. cignaIts stock closed nearly 2% lower and Centene Shares closed more than 2% lower.
Elevance Health closed more than 1% higher on Thursday. Unlike Humana, the insurer forecast 2024 earnings above estimates on Wednesday after higher premiums in its commercial business helped control medical costs in the fourth quarter.
Expectations for Humana’s 2024 earnings guidance were already low after the company warned last week that medical costs were higher than expected in the fourth quarter. It indicated that higher expenses could reduce its profits next year.
Humana confirmed that pessimism on Thursday. It reported a medical benefits ratio — the percentage paid out for claims compared to premiums — of 90.7% for the fourth quarter. Analysts had expected the ratio to be 89.7% for the period, according to LSEG.
The insurer reported an increase in outpatient services, such as orthopedic surgeries, and inpatient care in November and December among patients enrolled in Medicare Advantage.
Medicare Advantage plans are private versions of the federal government’s Medicare program, primarily for people age 65 and older. These plans are one of Humana’s largest forms of coverage outside of insurance that it provides to military families and retirees.
Humana reported fourth quarter earnings of $26.46 billion, which beat analysts’ estimates of $25.42 billion, according to LSEG data.
But the company posted a loss of $591 million, or $4.42 per share, in the fourth quarter. That compares with a loss of $71 million, or 12 cents per share, in the same period a year ago.
Excluding certain items, Humana reported a loss of 11 cents per share. Analysts had expected the company to post earnings of 15 cents per share, according to LSEG.