By Leroy Leo
(Reuters) -Shares of UnitedHealth Group fell 5% before the bell on Wednesday after the health insurer warned of a spike in medical costs in the second quarter as more older adults undergo non-urgent procedures they had delayed during the pandemic.
The warning also dragged down shares of rival health insurers that largely benefited from delayed non-urgent surgeries such as hip and knee replacements and hospital staffing shortages that had further led to fewer procedures.
UnitedHealth, at a Goldman Sachs healthcare conference, highlighted elevated demand for outpatient medical procedures, particularly related to knees and hips, from patients in Medicare health plans meant for those aged 65 and above.
“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 its second-quarter medical loss ratio – a percentage of its spend on claims compared to the premiums it collects – to the high-end or moderately above its full-year outlook of 82.1% to 83.1%.
UnitedHealth also expects its full-year medical loss ratio at the upper end of its forecast.
Weak demand for procedures during the pandemic was largely a boon for health insurers and a “bust” for providers like hospitals, Morningstar analyst Julie Utterback said in a research note.
“UnitedHealth’s comments suggest those trends may be reversing a bit, which could reverse the stock stories somewhat, as well.”
UnitedHealth’s 18.51 forward 12-month price-to-earnings ratio – a common benchmark for valuing stocks – is higher than rival Cigna Corp’s 10.29 and CVS Health Corp 8.26.
Shares of Humana Inc fell 7%, while Elevance Health and CVS Health Corp’s fell more than 3% each in premarket trading.
(Reporting by Leroy Leo in Bengaluru; Editing by Shinjini Ganguli)
