Shares in several leading health insurers dropped dramatically

Shares in several leading health insurers dropped dramatically following comments from UnitedHealth Group leadership indicating higher-than-anticipated medical cost losses for the second quarter, according to S&P Global.

In its first-quarter earnings release, UnitedHealth projected a medical loss ratio of between 82.1% and 83.1% for the full year.

The company’s second-quarter medical loss ratio is likely to be in the upper bounds of that range or moderately above it.

There is some indication that the rise in outpatient care is the result of pent-up demand due to COVID-19-related delays, Goldman Sachs said, as the increase has been focused among seniors and Medicare business.

UnitedHealth is typically the first major managed care insurer to report quarterly earnings and is expected to release its second-quarter figures in mid-July.

J.P. Morgan analysts wrote in a research note that UnitedHealth is anticipated to miss the consensus medical loss ratio for the second quarter.

Managed care stocks will trade down and hospitals, specifically Surgery Partners Inc., could potentially trade up, according to the J.P. Morgan analysts.

We think [UnitedHealth’s] comments will increase the perceived risk for the group going into 2Q earnings even though the impact could vary significantly depending on each company’s pricing/utilization assumptions.

Several other managed care insurers saw drops in stock price following the UnitedHealth presentation, although some had recovered by the week’s end.

CVS Health fell about 4% value. After experiencing some decline Cigna Group had recovered by noon Humana fell the furthest, tumbling over 12%. Humana had been outperforming its peers in the weeks since its first-quarter earnings report, which showed above-trend Medicare Advantage growth.

This expectation is primarily driven by the emergence of higher than anticipated non-inpatient utilization trends, predominately in the categories of emergency room, outpatient surgeries, and dental services, as well as inpatient trends that have been stronger than anticipated in recent weeks, diverging from historical seasonality patterns.

by Tyler Hammel