In a recent announcement, one of the largest health insurers in America has alerted the public to an expected rise in healthcare expenses. The surge is primarily driven by an increasing number of older Americans undergoing procedures such as hip and knee surgeries, resulting in a significant upswing in medical expenditure.
During a Goldman Sachs investor conference on Tuesday, UnitedHealth Group’s CFO, John Rex, revealed that the company foresees a greater utilization of members’ premiums for medical care in the second quarter. This uptick in expenditure is largely attributed to the growing demand for outpatient services among Americans aged 65 and above who are enrolled in Medicare plans.
The executive from UnitedHealth Group noted that the “strong” level of care sought by older individuals indicates a willingness to pursue procedures that were previously postponed during the pandemic. Consequently, the insurer will factor in this heightened demand when determining the pricing for the health insurance plans it offers in the private market for older Americans, commonly known as Medicare Advantage, in the upcoming year.
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Following this warning, health insurance companies witnessed a decline in stock prices on Wednesday. UnitedHealth, boasting a market cap of $424 billion, experienced a 7% decrease, while Humana, which also caters to Medicare members, suffered a significant drop of 13.5%. Elevance Health and CVS Health, the owner of Aetna, observed declines of 7% and 6%, respectively.
Conversely, the warning had a positive impact on hospital operators and medical device manufacturers, as their stocks saw an upswing on Wednesday. Health systems such as HCA and Tenet witnessed respective increases of 3% and 4%. Additionally, notable gains of 5% and 3% were recorded by Stryker and Medtronic, two businesses that produce medical technology.