Key Takeaways
- Humana Inc. warned that higher-than-expected medical costs to cover Medicare Advantage patients will hurt its full-year profit.
- The health insurance provider cut its 2023 earnings per share estimate to $26.09, short of analysts’ estimates.
- Humana said its efforts to reduce administrative expenses weren’t enough to offset rising medical costs.
- Humana shares were down more than 10% in early-afternoon trading, at a two-year low.
Humana Inc. (HUM) shares plunged Thursday after the health insurance provider warned that full-year profit will be negatively affected by higher medical-care costs for Medicare patients.
The company slashed 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 the higher level of medical utilization experienced during the third quarter in its Medicare Advantage business would continue for the remainder of the year.”
The company added that in the fourth quarter it saw Medicare Advantage cost trends increasing from higher-than-expected in-patient use and rising non-patient expenses, predominantly in the categories of physician, outpatient surgeries, and supplemental benefits.
Humana said that because of those higher costs, it anticipates a fourth-quarter adjusted insurance benefit ratio, which measures payouts versus premiums, of 91.4%, above its earlier guidance of 89.5%. It expects a full-year adjusted insurance benefit ratio of 88%, compared with the previous forecast of 87.5%.
The company noted that it tried to limit the financial impact through “various administrative cost containment, productivity and other initiatives.” but those weren’t enough to match the jump in medical expenses.
Shares of Humana were down 10.9% to $398.97 at 1:15 p.m. ET on Thursday, trading at their lowest level in two years.
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