Home News Humana Shares Sink More Than 10% to Two-Year Low on Medicare Medical Cost Warning

Humana Shares Sink More Than 10% to Two-Year Low on Medicare Medical Cost Warning

by SuperiorInvest

Key takeaways

  • Humana Inc. warned that higher-than-expected medical costs to cover Medicare Advantage patients will hurt its full-year profits.
  • The health insurance provider cut its 2023 earnings per share estimate to $26.09, missing analyst estimates.
  • Humana said its efforts to reduce administrative expenses were not enough to offset rising medical costs.
  • Humana shares fell more than 10% in afternoon trading, their lowest level in two years.

Shares of Humana Inc. (HUM) plunged Thursday after the health insurance provider warned that full-year profits will be negatively affected by higher health care costs for Medicare patients.

The company cut its 2023 earnings per share (EPS) outlook to $26.09 from the previous estimate of $28.25. The new EPS figure is also below analysts’ forecasts.

Humana said in a regulatory filing Thursday that it “anticipated that the higher level of medical utilization experienced during the third quarter in its Medicare Advantage business would continue through the remainder of the year.”

The company added that in the fourth quarter it saw an increase in Medicare Advantage cost trends due to higher-than-expected hospital usage and an increase in non-patient spending, predominantly in the physician, outpatient surgery and supplemental benefit categories.

Humana said that because of those higher costs, it anticipates a fourth-quarter adjusted insurance profit ratio, which measures payments versus premiums, of 91.4%, up from its previous guidance of 89.5%. A full-year adjusted insurance profit rate is expected at 88%, compared to the previous forecast of 87.5%.

The company said it attempted to limit the financial impact through “various administrative cost containment, productivity and other initiatives.” but that was not enough to match the increase in medical expenses.

Humana shares fell 10.9% to $398.97 as of 1:15 p.m. ET on Thursday, trading at their lowest level in two years.


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