BNR – Health insurer stocks fell dramatically on Wednesday after UnitedHealth announced its expenses were rising. Higher expenditures are attributed to a rise in surgeries among the elderly.
UnitedHealth’s stock sank 7.3% to $455.11, while Humana Inc, a Medicare insurer, plummeted 14%. In Wednesday’s trade, a broader index of organised care providers fell 8%, reaching a 17-month low.
Due to the COVID-19 epidemic and hospital personnel difficulties, insurers benefited from delays in non-urgent surgeries. However, UnitedHealth’s remarks indicate that the benefits may be fading. Meanwhile, stocks of medical device producers and hospital operators rose, since increasing surgery frequency means more income for them.
Higher demand for Medicare Health
UnitedHealth said it has seen an uptick in patient demand for Medicare health insurance for people aged 65 and up. The increasing demand was concentrated mostly on knee and hip issues.
“We’re seeing that more seniors are just more comfortable accessing services for things that they might have pushed off a bit like knees and hips,” Tim Noel, CEO of UnitedHealth’s Medicare and retirement business, said.
Elevance Health and CVS Health Corp both fell 6% to 7.5%.
According to Oppenheimer analyst Michael Wiederhorn, other insurers have not acknowledged comparable developments in recent weeks. Elevance Health, he continued, stated that developments were in sync with expectations, including in Medicare Advantage.
The stocks of both HCA Healthcare and Tenet Healthcare increased by 3% to 6%. Stryker, Boston Scientific, and Zimmer Biomet Holdings all climbed between 4% and 6%.
The increased demand for surgeries is likely to push UnitedHealth’s Q2 medical loss ratio to the high end. Also, it may push it slightly above its whole-year forecast of 82.1% to 83.1%.
Chief Financial Officer John Rex stated in April that some healthcare services, such as physician office activities, were approaching pre-pandemic levels. Others, however, such as emergency room visits and paediatrics, were lower.
UnitedHealth’s future yearly price-to-earnings ratio of 18.51 is greater than rival Cigna Corp’s of 10.29 and CVS Health Corp’s of 8.26.