Humana stock dived 15% to a nearly two-year low early Thursday after slashing its earnings outlook and reporting lackluster growth in its Medicare Advantage plans in the 2024 enrollment period. Other managed care stocks, including UNH and CVS Health (CVS), suffered more moderate losses, partly because they were already hit last week by UnitedHealth Group‘s (UNH) higher-than-expected medical costs.

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A filing from Humana (HUM), which was due to report Q4 results on Feb. 5, reported its cost for medical benefits amounted to 91.4% of premiums, above its expectation of 89.5%. The company now expects full-year adjusted EPS of $26.09 for 2023 vs. a FactSet consensus of $28.29.

Humana Warns On Inpatient And Outpatient Costs

Humana said Medicare Advantage cost trends were driven up by higher-than-anticipated inpatient utilization and higher paid claims for outpatient physician services, outpatient surgeries and supplemental benefits.

The higher outpatient costs are likely what dragged down the rest of the group, since that appears to be a new trend.

The impact of “emerging utilization trends” on the 2024 outlook “is anticipated to be material if current trends continue,” Humana said.

Further, Humana said its “balanced approach to pricing” resulted in lower new plan additions than expected, unexpectedly trailing the growth of the industry. The company said it now expects Medicare Advantage growth of 100,000 members in 2024, representing 1.8% growth.

HUM Warning Slams Managed Care Stocks

HUM stock tumbled 14.8% to 381.50 in premarket trade. If the move holds through the open, it would mark the stock’s lowest level since January 2022. UNH slid 4.5%, in a move that would undercut last week’s low.

CVS, which also competes in Medicare Advantage, fell 5.6%. Centene (CNC) lost 5.1%, Molina Healthcare (MOH) 4%, Elevance Health (ELV) 6.4%, and Cigna (CI) 4.4%.

Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.

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