Health insurer Humana warns of hit to 2025 profit, shares sink
By Leroy Leo and Sriparna Roy
(Reuters) -Health insurer Humana (NYSE:HUM) said on Thursday an «unprecedented» increase in medical costs that will hit its earnings this year has also put its 2025 profit target out of reach, sending its shares plunging 15%.
Medical costs for health insurers were elevated in 2023 and picked up more in the fourth quarter as people, especially older adults, returned to hospitals to undergo procedures like joint replacements which they had delayed during the COVID-19 pandemic.
«We believe the elevated (Medicare Advantage) medical costs are an industry dynamic, not specific to Humana, and that they may persist for an extended period or, in some cases, permanently reset the baseline,» Humana said.
Humana's forecast and comments also dragged shares of its peers CVS, Cigna (NYSE:CI), Centene (NYSE:CNC) and UnitedHealth (NYSE:UNH) down around 3%.
Expectations around Humana's 2024 profit were already low following its announcement last week of a hit from medical costs this year, with some analysts saying that the insurer may not be able to meet its 2025 target of $37 per share.
Humana now anticipates 2025 earnings between $22 and $26 per share, but said it would finalize the outlook once its contract bids for the year are finalized. Analysts expect a 2025 profit of $34.52 per share.
Demand for medical care rose during November and December among members enrolled in Medicare Advantage plans for older adults, Humana said.
Besides higher-than-expected demand for inpatient services, people were also opting for more outpatient surgeries, the insurer added.
Humana's 2024 forecast signals that the health insurer mispriced its contracts for the year and did not take into account the higher costs,
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