Jan 18, 2024 - Business

Humana warns of higher medical costs as patients use insurance more often

Illustration of a price tag in the shape of a red cross

Illustration: Sarah Grillo/Axios

Health insurers are feeling the pain as patients are getting treated at higher rates than expected.

Why it matters: The more people use their insurance plans, the lower the profits for the insurers and, typically, the higher prices are for people.

Driving the news: In a surprise announcement Thursday, Humana said its Medicare Advantage costs jumped after "higher than anticipated inpatient utilization" in November and December, meaning formal hospital admissions — and that the company expects the higher usage to continue.

  • The insurer also reported jumps in non-inpatient trends, predominantly in the categories of physician, outpatient surgeries and supplemental benefits," such as dental and vision.
  • As a result, the share of premiums it spent on medical care in the fourth quarter was 91.4%, up from a projected 89.5%, which meant less to pad the bottom line.

Meanwhile, the company lowered expectations for individual Medicare Advantage members in 2024 to just 1.8%.

The impact: Humana's stock was down 11% in early-afternoon trading, wiping several billion dollars off of its market valuation.

  • "The company's profit outlook through 2024 may wind up being weaker than previously anticipated," Morningstar analyst Julie Utterback wrote in a research note.

The big picture: Insurers have said that seniors, in particular, are catching up on elective procedures that were postponed during the pandemic.

  • Insurance giant UnitedHealth on Friday reported its own jump in utilization rates.

What we're watching: These trends could lead to higher premiums.

  • "Humana believes the emerging trends are impacting the industry broadly and anticipates the trends will be contemplated in the 2025 Medicare Advantage pricing cycle," the company said in a statement.
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