Humana shares fall as medical expenditures may exceed 2024 projection.

On Thursday, U.S. health insurer Humana warned a rise in older adult medical care demand will damage fourth-quarter performance and threaten its 2024 projection, sending its shares down 14%.

Humana, the second large insurer to predict a fourth-quarter medical cost increase in less than a week, said higher demand will raise prices. Larger rival UnitedHealth announced higher-than-expected medical service costs on Friday but did not anticipate them to last until 2024.

Humana warned of industry-wide cost increases, sending UnitedHealth, CVS, and Elevance Health shares down 2% to 5%. Health insurers' 2023 medical expenses rose owing to increased demand for orthopedic and cardiac surgery.

Humana reported that Medicare Advantage plan enrollees 65 and older had higher medical needs in November and December. Along with higher-than-expected inpatient demand, patients chose more outpatient procedures.

J.P.Morgan and Leerink analysts stated the business may not hit its 2025 profits forecasts due to rising medical service consumption. Humana will announce fourth-quarter earnings a week early on Jan. 25 and revise its full-year outlook.

"Longer-term investors may question Medicare Advantage market growth, too," said Morningstar analyst Julie Utterback. In Medicare's annual enrollment period, Humana saw lower-than-expected growth in new members

According to Utterback, disappointing yearly enrollment numbers may be worrying investors. Humana plans to cover high expenditures in the 2025 Medicare Advantage price cycle.

In its insurance division, the firm estimates 91.4% adjusted medical benefit ratio in the fourth quarter, up from 89.5%. An insurer's medical benefit ratio is its medical care proportion of premiums.

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