Humana is set to release its full earnings report on Thursday morning, providing analysts and investors with a much-anticipated opportunity to unravel the company's significant increase in medical costs during the fourth quarter. This report will shed light on what these skyrocketing expenses signify for Humana in the coming years.
On January 18, Humana raised concerns among investors by disclosing in a securities filing that its fourth-quarter medical loss ratio had reached 91.4%, surpassing analysts' expectations of 89%. These unexpected figures compounded worries over the escalating healthcare utilization rate among older individuals in the United States. UnitedHealth Group also reported a higher-than-anticipated medical loss ratio earlier in January, amplifying these concerns.
Major managed care companies, including Humana, CVS Health, and UnitedHealth, have made substantial investments in the government-funded Medicare Advantage program. This program allows private companies to oversee health benefits for seniors. However, a surge in healthcare service usage could severely impact profits, at least until these companies can revamp their health plans by 2025.
Stay tuned for Humana's earnings report to gain further insights into the implications of their rising medical costs and their strategy moving forward.
UnitedHealth Executives Blame Short-Term Spike in Physician Visits
UnitedHealth executives recently attributed a temporary increase in physician visits to seniors seeking respiratory syncytial virus vaccines, among other factors. However, a securities filing by Humana has raised concerns about the lasting impact on performance in 2024.
Medicare Advantage's Influence on Humana
Humana is particularly vulnerable to higher utilization among seniors due to the fact that Medicare Advantage comprises the majority of its business.
According to Jefferies analyst David Windley, who spoke after Humana's results preview on Jan. 18, UnitedHealth initially claimed that the higher utilization was only a problem for 2023. However, with the recent news from Humana, it seems unlikely that this trend will be resolved so quickly.
Negative Outlook for Humana
Within the same filing, Humana stated that it expects its Medicare Advantage enrollment to grow by just 1.8% in 2024, which is lower than previously anticipated. As a result, numerous analysts have expressed pessimism regarding Humana's future prospects. In a note on Jan. 19, Leerink Partners analyst Whit Mayo remarked that Humana had "probably lost a year of growth."
As of now, Humana shares have dropped by about 12% this year, whereas the S&P 500 has seen a 2% increase.
Anticipated Quarterly Financial Results
The complete quarterly financial results for Humana are scheduled to be announced this Thursday before the market opens. Hopefully, the announcement and subsequent analyst call will provide further insight.
According to FactSet, Wall Street analysts are expecting Humana to report fourth-quarter earnings of 76 cents per share, with sales totaling $25.5 billion.
