UnitedHealth Slumps, Rival Insurers Follow, On Worries Over Rising Medical Costs

UnitedHealth UNH shares moved firmly lower Wednesday, dragging rival health insurance groups into the red, following comments late Tuesday from a company official that suggested medical costs could surge over the coming months.

Speaking as part of a panel discussion at a Goldman Sachs healthcare conference in Dana Point, California, Tim Noel, who runs UnitedHealth's Medicare and retirement business, said the company was seeing a notable increase in older Americans opting to undergo elective procedures they had delayed during the Covid pandemic.

The uptick could pressure the medical cost ratios -- a key metric of profitability -- of not only UnitedHealth, but rivals such as Humana (HUM) - Get Free Report and CVS Health (CVS) - Get Free Report, which owns the Aetna division, as larger portions of collected premiums are paid out on insurance claims.

"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," Noel said in remarks reported by Reuters.

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UnitedHealth shares, a Dow component, were marked 4.9% lower in pre-market trading Wednesday to indicate an opening bell price of $467.07 each. Humana shares slumped 5.6% to $484.00 each while CVS Health was marked 2.3% lower at $70.59 each.

Earlier this spring, UnitedHealth posted stronger-than-expected first quarter, with record overall revenues of $91.9 billion, as it added some 655,000 new Medicare Advantage members, as well as a further 570,000 Medicaid members over the three months ending in March.

Overall premiums were up 13.6% to $72.786 billion while operating costs rose 19.5% to $13.625 billion.

CVS Health, meanwhile, trimmed its full-year profit forecast in May as it continues to push deeper into the healthcare services market with two recent acquisitions priced at nearly $320 billion.

CVS, which is buying Oak Street Health for $10.6 billion and closed its $8 billion purchase of Signify Health earlier this year, said it sees profits in the region of $8.50 to $8.70 per share, a 20 cent reduction from its prior forecast that the company said was linked to "acquisition-related transaction and integration costs".

CVS also reiterated its forecast for cash flows from its overall business to come in between $12.5 billion to $13.5 billion.