UnitedHealth drags managed care as cost concerns cloud Q4 beat

Wolterk/iStock Editorial via Getty Images Managed care players traded lower on Friday as cost concerns weighed on industry bellwether UnitedHealth's ( NYSE: UNH ) Q4 2023 results, which, however, exceeded Wall Street forecasts. Notable decliners include Humana ( HUM ) and Alignment Healthcare ( ALHC ).

Similar to UnitedHealth ( UNH ), the duo operates sizable Medicare Advantage businesses focused on federally funded healthcare. CVS Health ( CVS ) and Cigna ( CI ) are also among the decliners. Jeff Jonas, portfolio manager at Gabelli Funds, told Reuters that the Minnesota based healthcare giant indicated "some signs of cost pressure," which he said could extend into 2024.

However, UNH reaffirmed its 2024 outlook, excluding the impact of its ongoing sale of Brazil operations, which it said would lead to a $7B charge. As for Q4 2023 results, UnitedHealth's ( UNH ) medical care ratio, the share of premiums spent on healthcare costs, reached 85% above consensus. Meanwhile, the full year medical care ratio rose to ~83% from 82% last year as outpatient care, particularly among seniors, increased and the business mix worsened.

RBC Capital Markets analyst Ben Hendrix argued that UnitedHealth’s ( UNH ) medical costs could have a negative readthrough to other managed care companies this earnings season. In other results, UNH's Medicaid enrollees slipped to ~7.8M from ~8.1M at Q3 end amid ongoing eligibility reviews. Medicaid depended managed care firms Centene ( CNC ), Molina Healthcare ( MOH ), and Elevance Health ( ELV ) are also in the red.

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