Healthcare Insurance Giant Humana Stock Hits 52-Week Low Today - Here's Why

Healthcare insurance firm Humana Inc HUM cut its fiscal 2023 earnings outlook as the costs of members’ care exceeded its expectations.

The company expects 2023 adjusted earnings to be $26.09 a share, per an SEC filing Thursday. Humana had earlier forecast at least $28.25 a share versus the consensus of $28.30.

“Due to the recency and significance of the latest emerging trends, the company was unable to offset the entirety of the higher than anticipated medical costs that continued to increase through the end of the fourth quarter,” the company said in the filing.

During the third quarter earnings call, the company projected that the increased medical utilization observed in its Medicare Advantage business would persist for the remainder of the year. 

Also Read: After Dropping Humana Acquisition Attempt Cigna In Talks To Sell Medicare Advantage Business Amid Competition.

The actual results for the fourth quarter confirmed a further rise in Medicare Advantage medical costs, driven by unexpectedly high inpatient utilization, especially in November and December. 

Additionally, non-inpatient trends, particularly in physician services, outpatient surgeries, and supplemental benefits, saw a notable increase in claims data for November and December, received in December and January, respectively. 

The elevated cost trends are anticipated to lead to a fourth-quarter 2023 Adjusted Insurance segment benefit ratio of approximately 91.4%, deviating from the company’s initial expectation of 89.5%. 

The full-year Adjusted Insurance segment benefit ratio is also expected to be around 88%, contrasting with the company’s previous projection of 87.5%.

2024 Guidance

• Following the annual election period (AEP), Humana has adjusted its projection for individual Medicare Advantage (MA) growth, anticipating an increase of around 100,000 members by December 31, 2024, up 1.8% from its membership as of December 31, 2023 of approximately 5.4 million.
•  This revision contrasts with the company’s earlier forecast of achieving ‘at or slightly above industry average growth.’ 
•  The outlook for 2024 is influenced by Humana’s balanced pricing strategy, resulting in a reduced share of the overall industry growth. 
•  Although the overall AEP sales volume met expectations, a higher proportion was driven by plan changes among existing members, leading to lower-than-expected new member sales.
•  Despite the increased plan change activity, Humana experienced slightly higher attrition during the AEP than initially anticipated. 
•  The actual AEP growth for the company stands at approximately 120,000 members, with an expected slight decline by year-end. 
•  This decline is attributed to the more limited sales opportunities post-AEP and the anticipation of slightly higher attrition within its Dual Special Needs Plan offerings. 
•  This higher attrition is expected in the coming months as members lose dual eligible status due to the ongoing Medicaid redetermination process.

Investors have reacted to Humana’s weak guidance as the stock is down over 10%. Other players have also felt the pinch.

The Cigna Group NYSE: CI) stock is down 3.07% at $299.00, with CVS Health Corp CVS stock trading 2.83% lower at $74.80 and UnitedHealth Group Inc UNH down 2.66% at $ 511.00 during the premarket trading.

Price Action: HUM shares are down 12.20% at $393.00 during the premarket session on the last check Thursday.

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