(Reuters) -Humana’s second-quarter profit beat Wall Street estimates on Wednesday, as a lower-than-expected spike in non-urgent medical procedures helped keep a check on the health insurer’s costs, sending shares nearly 6% higher in morning trade.
Insurers have reported better-than-expected medical costs despite warnings from Humana and UnitedHealth – the two biggest providers of Medicare Advantage plans for people aged 65 and above – in June that an increase in non-urgent surgeries was driving up claims.
On Wednesday, Humana said claims were showing signs of stabilization.
Overall, the utilization of medical services by Medicare beneficiaries in recent weeks was incrementally positive from what it had assumed in June, CFO Susan Diamond said in an investor conference call.
Humana reported a medical loss ratio – the percentage of premiums it spends on medical care – of 86.3% for the quarter, versus the average analysts’ estimate of 86.5%, according to Refinitiv data.
The company had said in June it expected the business’ second-quarter and full-year MLR to be near the top half of its full-year range of 86.3% to 87.3%. Humana affirmed its 2023 MLR forecast on Wednesday.
“We are assuming that the higher trend that we’ve seen in 2023 will continue into 2024,” Diamond said.
While they have not fully embeded the assumption in their bids for 2024 Medicare Advantage plans submitted in early June, the insurer is still upbeat about its earnings next year.
Shares of Humana have slumped over 10% since UnitedHealth and its own warning in June.
Excluding one-off items, the health insurer earned a profit of $8.94 per share in the quarter ended June 30, higher than analysts’ average estimate of $8.82 per share, according to Refinitiv data.
(Reporting by Leroy Leo in Bengaluru; Editing by Krishna Chandra Eluri)
