By Humana Inc. shares (HUM) dropped significantly in premarket trading on Thursday after the giant health insurer revised its full-year 2023 earnings guidance downward. The company cited increasing medical costs and slower-than-expected growth in Medicare Advantage enrollment for the adjustment.
Updated Earnings Projections
Humana now expects to report full-year 2023 earnings per share of $20.00, a decrease from its previous guidance of at least $26.31 per share. Additionally, adjusted earnings per share are projected to be $26.09, compared to the previous guidance of at least $28.25.
Impact on Other Players in the Market
Following Humana’s announcement, stocks of other major players in the Medicare Advantage market also took a hit in early Thursday trading. Shares of UnitedHealth Group Inc. (UNH), Cigna Group (CI), Elevance Health Inc. (ELV), and CVS Health Corp. (CVS) all experienced declines ranging from 3% to 6%.
Contributing Factors
Humana attributed the rise in medical costs for Medicare Advantage to higher inpatient care costs, outpatient surgeries, supplemental benefits, and other factors. The company expressed difficulty in countering these expenses through cost cuts and productivity improvements due to emerging trends.
Revised Growth Expectations for 2024
Humana anticipates a modest increase of approximately 100,000 members in Medicare Advantage enrollment for 2024, representing a growth rate of 1.8% over the 5.4 million members recorded at the end of 2023. The company believes that its balanced approach to pricing has resulted in a lower share of overall industry growth.
Company Outlook
In light of existing regulatory changes and evolving utilization patterns, Humana maintains that its cautious approach to pricing for 2024 was warranted. The company remains committed to navigating the current market landscape effectively.
Humana shares have declined by 2.2% year to date, while the S&P 500 (SPX) has experienced a more modest decrease of 0.6%.
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