UnitedHealth, Humana, CVS Shares Suffer From Rising Medical Costs

(CTN News) – The shares of UnitedHealth (UNH – Get Free Report) moved lower Wednesday, dragging rival health insurers into the red, after a company official suggested medical costs may increase in the near future, causing investors to be concerned about the company’s financial condition.

Tim Noel, who heads UnitedHealth’s Medicare and retirement business, said on Tuesday at a Goldman Sachs conference in Dana Point, Calif.

He said the company is seeing a notable increase in older Americans opting to undergo elective procedures that they had put off during the covid pandemic as part of a panel discussion at the conference.

There will be a negative impact on UnitedHealth’s medical-cost ratios — a key metric of profitability — as a large portion of collected premiums will be paid out on insurance claims, as well as rivals such as Humana (HUM) – Get Free Report and CVS Health (CVS) – Get Free Report, which owns Aetna.

It is becoming apparent that more seniors are becoming comfortable with seeking care for things like knees and hips that they may have pushed off a bit in the past, said Noel in a recent interview with Reuters.

It is a down day for UnitedHealth UNH and HUM shares, as well as CVS

In early trading on Wednesday, UnitedHealth shares, a Dow component and the Average’s largest weight, fell 7.25% to $4535.77 a piece, a drop of 7.25% off their Tuesday close.

As a result, Humana’s shares plunged by 13.25% to a one-year low of $444.25, while CVS Health’s shares fell by 5.9% to $68.00, a one-year low.

Furthermore, the S&P 500 Managed Health Care subindex, a subindex of the S&P 500 that is a subindex of the S&P 500, fell 7.88% to 3,631.87 points, which is a one-year low for the index.

The first quarter revenue of UnitedHealth was higher than expected, with an overall revenue of $91.9 billion, a record for the company.

The company added around 655,000 new Medicare Advantage members during the third quarter of the year, as well as 570,000 more Medicaid members during the same time period.

There was an overall increase of 13.6% in premiums to $72.79 billion and an increase of 19.5% in operating costs to $13.63 billion.

As CVS Health continues to expand deeper into health-care services with two recent acquisitions, it trimmed its full-year profit forecast in May as it attempts to maximize profits.

As I mentioned earlier in the year, CVS is buying Oak Street Health for $10.61 billion and closed its purchase of Signify Health earlier in the year for $8 billion.

In terms of profit per share, the company forecasted a profit in the range of $8.50 to $8.70, a 20-cent reduction from its previous forecast.

According to the company, the drop is due to expenses incurred as a result of acquisition-related transactions and integrations.

Furthermore, CVS reiterated its forecast for the company’s overall cash flows from operations to be between $12.5 billion and $13.5 billion in the next few years.

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