[1/2] The UnitedHealth Group logo is seen on the side of one of their office buildings in Santa Ana, California, US, April 13, 2020. REUTERS/Mike Blake/File Photo/File Photo
June 14 (Reuters) – Shares of health insurers fell in pre-market trading on Wednesday after industry leader United Health said higher demand for long-awaited medical procedures in the second quarter was expected to push up its medical costs.
However, the warning lifted shares of medical device makers and hospital operators who have been hit by hospital staffing shortages and people delaying non-urgent surgeries due to the COVID-19 pandemic.
“UnitedHealth’s comments suggest that these trends may reverse somewhat, which could lead to equity stories reversing somewhat as well,” Morningstar analyst Julie Otterback said in a research note.
UnitedHealth, at a Goldman Sachs healthcare conference on Tuesday, said it had seen increased demand from patients on Medicare healthcare plans for those 65 and older, particularly for knees and hips, which sent its shares down about 6%.
“We’re seeing more seniors feel more comfortable accessing services for things they might have pushed a little bit like on their knees and hips,” Tim Noel, CEO of UnitedHealth’s healthcare and retirement company, said late Tuesday.
This pent-up demand is expected to push the company’s medical loss ratio in the second quarter — the ratio of claims spent to premiums collected — to the upper limit or moderately higher than its full-year forecast from 82.1% to 83.1%.
In April, Chief Financial Officer John Ricks said some health care services, such as doctor’s office activity, were close to pre-pandemic levels, while others including emergency room visits and pediatrics were below those levels. Shares of Medicare-focused insurer Humana Inc (HUM.N) fell 7%, while Elibility Health and CVS Health Corp’s (CVS.N) fell more than 3% each in premarket trading.
Hospital operators HCA Healthcare (HCA.N) and Tenet Healthcare (THC.N) rose between 2% and 4%, while medical device makers Stryker (SYK.N), Boston Scientific (BSX.N) and Zimmer Biomet Holdings rose 2%. 2% each.
UnitedHealth’s 12-month price-earnings ratio of 18.51 — a common benchmark for stock valuation — is higher than rival Cigna Corp (CI.N) of 10.29 and CVS Health Corp (CVS.N) of 8.26.
(Reporting by Leroy Liu in Bengaluru; Writing by Manas Mishra; Editing by Chingini Ganguly
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