Health insurers stumble after UnitedHealth warns of higher costs
[1/2] The corporate logo of the UnitedHealth Group appears on the side of one of their office buildings in Santa Ana, California, U.S., April 13, 2020. REUTERS/Mike Blake/File Photo/File Photo
June 14 (Reuters) - Shares of health insurers declined in premarket trading on Wednesday after industry bellwether UnitedHealth (UNH.N) said a spike in demand for long-delayed medical procedures in the second quarter was expected to drive up its medical costs.
The warning, however, lifted shares of medical device makers and hospital operators that have been hit by hospital staffing shortages and people delaying non-urgent surgeries due to the COVID-19 pandemic.
"UnitedHealth's comments suggest those trends may be reversing a bit, which could reverse the stock stories somewhat, as well," Morningstar analyst Julie Utterback said in a research note.
UnitedHealth, at a Goldman Sachs healthcare conference on Tuesday, said it saw increased demand from patients in Medicare health plans for those aged 65 and above, particularly related to knees and hips, sending its shares nearly 6% lower.
"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 late Tuesday.
This pent-up demand is expected to drive up the company's second-quarter medical loss ratio - a percentage of spend on claims compared to premiums collected - to the high-end or moderately above its full-year outlook of 82.1% to 83.1%.
In April, Chief Financial Officer John Rex had said some health care services, such as physician office activity, were near pre-pandemic levels, while others including emergency room visits and pediatrics were below those levels. Shares of Medicare-focused insurer Humana Inc (HUM.N) fell 7%, while Elevance Health and CVS Health Corp's (CVS.N) fell more than 3% each in premarket trading.
Hospital operators HCA Healthcare (HCA.N) and Tenet Healthcare (THC.N) rose between 2% and 4%, while medical device makers Stryker (SYK.N), Boston Scientific (BSX.N) and Zimmer Biomet Holdings were up 2% each.
UnitedHealth's 18.51 forward 12-month price-to-earnings ratio - a common benchmark for valuing stocks - is higher than rival Cigna Corp's (CI.N) 10.29 and CVS Health Corp (CVS.N) 8.26.
Reporting by Leroy Leo in Bengaluru, Writing by Manas Mishra; Editing by Shinjini Ganguli
Our Standards: The Thomson Reuters Trust Principles.
Source: Reuters.com
