Major health insurers’ stocks dropped sharply on Wednesday after UnitedHealth Group Inc. executives said at an investor conference that their Medicaid business would experience a “disturbance” and talked about how patients use healthcare services.
UnitedHealth CEO Andrew Witty said at a Bernstein conference Wednesday morning that the industry has been through a “prolonged redetermination cycle in Medicaid.” This is the process that states use to make sure that people who are enrolled in Medicaid are still eligible for coverage under that programme. If you try to make sure that healthcare rates and usage are “perfectly synchronised through a multi-quarter cycle,” Witty said, “that’s probably going to cause some trouble.”
Brian Thompson, CEO of UnitedHealth’s insurance unit, said at the conference that there has been “not a lot of visibility” since the last public update from the company about how patients are using healthcare services. Thompson said that’s partly because of the cyberattack on the company’s Change Healthcare unit, which caused claims to be processed later than planned. UnitedHealth also temporarily loosened up its programmes for managing patient use because of the hack. Thompson said that May and June would give them a better idea of how people are using the service.
Analysts at Mizuho Securities said in a note Wednesday that the executives’ comments “will create concern that there is risk to 2024 estimates” for UnitedHealth. The comments will also create uncertainty for other companies that deal with Medicaid.
This morning, the stock price of UnitedHealth (UNH, -3.76%) dropped more than 4%. Other big Medicaid players, such as Centene Corp. CNC, -3.05%, Elevance Health Inc. ELV, -2.63%, and Molina Healthcare Inc. MOH, -2.80%, also fell by about 3% to 5%.
KFF, a health policy research nonprofit, says that over 20 million people have lost their Medicaid coverage since April of last year, when states were allowed to start taking people off the programme again who were no longer eligible. In the past, a law from the time of the pandemic gave states extra federal money in exchange for keeping people on Medicaid.
Overall, the number of people dropping Medicaid because of this “unwinding” process has been about what the industry expected. However, investors are keeping an eye on whether the current rates are high enough to cover the remaining enrollees, especially since the people who dropped coverage were probably healthier, Mizuho analysts said in a report Wednesday.
The things UnitedHealth said hurt the stocks of major insurers, but hospital stocks went up. There was a 2.3% rise in HCA Healthcare Inc. shares and a 2.8% rise in Universal Health Services Inc. shares after the market opened.
The S&P 500 SPX is up 10.6% so far this year, while UnitedHealth’s stock is down 8.7%.
