The stock of Humana has dropped significantly due to a poor 2024 forecast. The company, which mainly offers government-backed insurance through the Medicare Advantage program, predicts adjusted earnings of around $16 per share for 2024, which is less than half of what analysts had anticipated. This outlook has added to concerns on Wall Street about declining profits for health insurance companies in the face of rising medical costs. UnitedHealth also reported an increase in medical costs, though not as dramatic as Humana’s.
This forecast negatively impacted other health insurance stocks as well. Shares of UnitedHealth, CVS Health, Cigna, Centene, and Elevance Health all experienced declines. Elevance Health, however, provided an upbeat 2024 earnings forecast after successfully managing medical costs in the fourth quarter with the help of higher premiums in its commercial business.
Humana had already warned of higher-than-expected medical costs in the fourth quarter, indicating the potential impact on future profits. This concern was confirmed when the company reported a medical benefit ratio of 90.7% for the fourth quarter, higher than analysts’ estimates. The surge in outpatient services and inpatient care among Medicare Advantage enrollees contributed to these increased costs.
Despite posting fourth-quarter revenue that surpassed analysts’ estimates, Humana recorded a significant loss. Excluding certain items, the company reported an 11 cents per share loss, contrary to analysts’ expectations of a 15 cents per share profit.
