Humana joins UnitedHealth in flagging cost hit from rising surgeries

[June 17, 2023]  By Manas Mishra and Leroy Leo

(Reuters) - Humana Inc on Friday joined larger health insurer UnitedHealth in warning of a jump in medical costs this year due to higher-than-expected demand for surgeries and other medical procedures.

Pandemic-driven restrictions and hospital staffing shortages had led to long delays in elective procedures such as hip and knee replacements, especially among older adults at higher risk of contracting severe COVID-19.

"Now with restrictions being lifted and the public health emergency coming to an end officially at a national level, we're going to see that (surgeries) come back," said Pavani Rangachari, a professor of healthcare administration and public health at the University of New Haven.

UnitedHealth earlier this week said it had seen higher demand for payouts over medical care in April, May and early June as Medicare-eligible adults became more comfortable stepping into doctor's offices again as COVID risks receded.

The warning wiped billions of dollars off the market value of health insurers on Wednesday, while lifting shares of medical device makers and hospital operators.

Kentucky-based Humana's shares fell another 2.6% on Friday, while other insurers Elevance Health and Centene Corp were down 2% and 1%, respectively. 

Signage for Humana Inc. is pictured at a health facility in Queens, New York City, U.S., November 30, 2021. REUTERS/Andrew Kelly

Demand for medical procedures is also being fueled by an aging baby boomer population, a bump in life expectancy and a shift towards value-based care where payments are based on health outcomes rather than services provided, Rangachari said.

Humana also noted elevated demand for outpatient surgeries and dental services, as well as strong inpatient demand in recent weeks.

The insurer now expects its medical loss ratio - the percentage of claims paid out compared with premiums collected - at the top end of its full-year projected range of 86.3% to 87.3%.

Still, the company reaffirmed its adjusted earnings forecast of at least $28.25 per share for 2023.

(Reporting by Manas Mishra and Leroy Leo in Bengaluru; Editing by Anil D'Silva and Devika Syamnath)

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