By Shriparna Roy and Amina Niasse
(Reuters) – Insurer Elevance Health Inc said it expects claims from members enrolled in government-sponsored Medicaid plans to rise in the second half and that health care costs will remain high this year, sending its shares down about 7 percent on Wednesday.
Shares of rival insurers that offer Medicaid plans also fell, with Centene falling as much as 4 percent and Molina Healthcare dropping as much as 4.7 percent.
Elevance and other insurers say the costs of Medicaid plans, which cover medical expenses for low-income people, have turned out to be higher than expected.
The company said at an industry conference last month that the end of pandemic-era policies has reduced the number of people eligible for Medicaid plans this year, shifting coverage to patients with greater medical needs.
Although re-enrollment in the company’s Medicaid plans has begun to increase, the number of patients enrolled in the company’s plans is sicker than expected, which could offset the growth in operating revenue.
Elevance expects health care utilization among Medicaid enrollees to increase in the second half of 2024 and is revising its full-year health care loss ratio forecast, a measure that tracks health care costs, to be near the high end of its initial range of 86.5% to 87.5%.
In the second quarter, Elevance’s medical loss ratio – the percentage of premiums spent on medical expenses – was 86.3%, below the 86.4% reported last year and LSEG’s estimate of 86.42%.
Bernstein analyst Lance Wilkes said the company’s medical bills suggest high but stable demand for health care services, which is in line with rival UnitedHealth’s results on Tuesday.
UnitedHealth and other insurers with large Medicare operations covering people 65 and older have seen a larger-than-expected increase in use of health care services since last year.
Elevance’s second-quarter adjusted earnings were $10.12 per share, beating expectations of $10.01 per share, helped by strong performance at its health services division, Careron, higher premiums and growing Obamacare and private health insurance membership.
Careron, through which Elevance operates its pharmacy benefits management division, said its revenue rose nearly 10% to $13.3 billion, buoyed by demand for medical benefits and behavioral health management services.
(Reporting by Puyaan Singh and Sriparna Roy in Bengaluru and Amina Niasse in New York; Editing by Devika Shamnath)
