Shares of Humana tumbled early Thursday after it said it was dealing with higher-than-expected care costs from its Medicare Advantage customers, forcing it to chop profit expectations.
The update from Humana arrived less than a week after UnitedHealth Group surprised Wall Street, saying that its medical costs had soared 16% in its most recent quarter.
Humana said its Medicare Advantage patients used more inpatient care than it expected in November and December. The health insurer also saw more growth in care that doesn't involve a hospital stay, like doctor visits and outpatient surgeries.
Shares slumped 13% before the market opened, dragging down other insurers as well early Thursday.
Humana is one of the nation's largest providers of Medicare Advantage plans, which are privately run versions of the federal government's Medicare program mostly for people age 65 and older. Insurers dealt with higher-than-expected costs from that patient population through most of last year, partly because patients continued to return to surgery centers and doctor offices after shying away during the COVID-19 pandemic.
Humana said it now expects adjusted earnings for last year to total about $26.09 per share.
That falls more than $2 below Wall Street expectations for $28.29 per share, according to the data firm FactSet.
The company had said in November that it expected full-year adjusted earnings of at least $28.25 per share.
For the new year, Humana also said it now expects less than 2% enrollment growth from its Medicare Advantage business, which covered about 5.4 million people at the end of last year. The company said it had fewer new customers than it expected during the recently concluded annual enrollment window.
The insurer also said Thursday that it will now report fourth-quarter earnings on January 25 after initially planning to do so on Feb. 5.
Shares of Humana Inc., based in Louisville, Kentucky, fell to $387.21 in premarket trading Thursday. UnitedHealth Group Inc. also dropped more than 4%. The Blue Cross-Blue Shield insurer Elevance Inc. fell 5%.