Shares of major managed care insurers have dropped in recent weeks following an earnings season affected by rising costs tied to government-subsidized plans.
High expenses linked to Medicare Advantage, a government-subsidized program for seniors, and a higher patient acuity in Medicaid contributed to third-quarter results that fell short of expectations.
UnitedHealth Group experienced a notable impact, with its stock down 6.7% since Oct. 14, the day before its earnings report.
Despite revenue growth, UnitedHealth revised its adjusted earnings per share forecast for the year to between $27.50 and $27.75, down from the prior $27.50 to $28. The adjustment partially reflects an estimated 75-cent-per-share impact from the Change Healthcare cyberattack, according to CFO John Rex.
Our teams have managed through a challenging period, navigating Medicare rate cuts from the Centers for Medicare & Medicaid Services, shifts in Medicaid member determinations, new care patents, and the Change Healthcare cyberattack
CEO UnitedHealth Group Andrew Witty
Piper Sandler analyst Jessica Tassan maintained an “overweight” rating on UnitedHealth, noting the challenges may ease by 2025 due to the company’s diversified business.
UnitedHealth is facing pressures in Medicare Advantage and Medicaid, but we’re seeing strong results in employer and individual business lines.
Other insurers also saw declines. Centene Corp.’s stock fell 17.9% to $59.82 from $72.90, The Cigna Group dropped 9.6% to $317.57 from $351.45, and Elevance Health declined 18.4% to $415.54 from $509.02.
These drops outpaced those of the S&P 500 and S&P Insurance index, which declined by 1.07% and 0.4%, respectively.
Molina Healthcare experienced the steepest fall among managed care insurers, with shares down 19.1% from Oct. 14 to Oct. 23, closing at $277 from $340.12.
Molina’s third-quarter medical loss ratio rose to 90.5%, above its target range, partly due to premium rate cuts in California, according to CEO Joseph Zubretsky.
The quarter showed higher-than-expected medical costs, driven by redetermination-related acuity shifts and increased usage in long-term services, pharmacy, and behavioral health.
Despite these pressures, Molina reaffirmed its 2024 earnings guidance, highlighting improvements in its Marketplace plans.
J.P. Morgan analyst Lisa Gill retained an “overweight” rating on Molina, noting that while medical losses attracted investor attention, results were likely “better than feared.”
Molina reaffirmed its full-year guidance, with anticipated Marketplace strength, favorable operating leverage, and increased investment income balancing the trend in Medicaid and Medicare
With only Humana Inc. and Cigna yet to release their third-quarter figures, it remains to be seen whether the medical loss trends will persist across the managed care sector.
