Humana stock plunges on dismal 2024 forecast, as insurers face soaring medical costs

Shares of Humana plummeted Thursday after the health insurer issued dismal full-year earnings guidance, citing soaring medical costs that are dogging the broader insurance industry.

Those expenses have spiked as an increasing number of older adults return to hospitals to undergo procedures they had delayed during the pandemic, such as joint and hip replacements. 

Humana, which primarily provides government-backed insurance through the Medicare Advantage program, said it expects adjusted earnings of about $16 per share for 2024. That’s a little more than half of the $29.10 per share that analysts expected, according to LSEG, formerly known as Refinitiv. 

The guidance adds to Wall Street’s concerns about health insurance company profits falling as medical costs jump. UnitedHealth on Friday also reported its own jump in medical costs, though it was less extreme than Humana’s.

Humana shares closed 10% lower Thursday.

Its forecast dragged down other health insurance stocks. Shares of both UnitedHealth and CVS Health closed around 4% and 3% lower, respectively. Cigna’s stock closed almost 2% lower, and Centene shares ended more than 2% lower.

Elevance Health closed more than 1% higher on Thursday. Unlike Humana, the insurer forecast 2024 earnings above estimates Wednesday, after higher premiums in its commercial business helped control medical costs in the fourth quarter.

Expectations for Humana’s 2024 earnings guidance were already low after the company warned last week that medical costs were running higher than expected in the fourth quarter. It signaled that higher expenses could cut into its profits in the year ahead. 

Humana confirmed that pessimism Thursday. It reported a medical benefit ratio — the percentage of payout on claims compared with premiums — of 90.7% for the fourth quarter. Analysts had estimated that the ratio would be 89.7% for the period,…