Topline
Health insurance firms saw significant drops in their stock prices Wednesday after UnitedHealth Group said it was expecting its profits to take a hit from a surge of people undergoing non-urgent surgeries they put off during Covid-19.
UnitedHealth’s stocks fell Wednesday after the company said a spike in surgeries was impacting its … [+]
Key Facts
The price falls came after UnitedHealth CEO Tim Noel said more seniors who are enrolled in Medicare have been undergoing surgeries for non-urgent issues like knees and hips, in comments he made Tuesday at the Goldman Sachs Global Healthcare Conference.
The trend appears to be “pent-up demand” that is now being “satisfied,” he said.
UnitedHealth’s stock was down 7% in intraday trading early Wednesday afternoon, while competitors also fell, with Humana down 12%, Elevance Health down 7% and CVS Health Corp. down 6%.
What To Watch For
UnitedHealth is expecting to see the uptick in surgeries eat into its second quarter profits. Its medical loss ratio, which represents the proportion of premiums going to medical care, is expected to be close to 83.1%, higher than last quarter’s 82.2%. While executives said during the call these issues may only affect earnings during the second quarter, Noel added they are “not assuming that those abate right away.”
Key Background
UnitedHealth thrived during the pandemic and its stock has risen close to 80% since February 2020. During the first quarter of 2023, the company earned almost $92 billion in revenue, a 15% increase from the previous year. People sought less in-person medical care during the pandemic while they were socially distancing, which resulted in major profits for health insurance companies. Emergency room visits are still slightly below historical averages, UnitedHealth CFO John Rex said during an earnings call in April, but higher than they were during the pandemic.
Contra
While insurers were negatively affected by UnitedHealth’s comments, medical device makers and hospital operators generally saw stocks go up Wednesday. Hospital firms Tenet Healthcare and HCA Healthcare were both up about 3% early Wednesday afternoon, while manufacturers Boston Scientific and Zimmer Biomet were up more than 4%.
Further Reading
UnitedHealth First-Quarter Earnings, Revenue Up as Company Added Members (Wall Street Journal)
Pandemic profits: top US health insurers make billions in second quarter (Guardian)
Full coverage and live updates on the Coronavirus
Source: https://www.forbes.com/sites/katherinehamilton/2023/06/14/health-insurance-stocks-tumble-over-spike-in-surgeries-delayed-by-pandemic/