One of America’s biggest health insurers just issued a warning that healthcare costs are about to soar

One of America’s biggest health insurers just issued a warning that healthcare costs are about to soar
Andrew Witty

UnitedHealth Group CEO Andrew WittyReuters

  • An insurance exec warned of higher medical costs as Americans start to get more elective procedures.

  • The comment sent health insurer stocks tumbling on Wednesday.

  • It suggests people are getting care they put off during the height of the pandemic.

Older Americans are starting to get more procedures like hip and knee surgeries, and it’s driving up how much one of the biggest US health insurers is spending on medical care.

UnitedHealth Group expects to spend more of its members’ premiums on medical care in the second quarter, driven by a rise in outpatient care for Americans 65 and older in Medicare plans, CFO John Rex said Tuesday at a Goldman Sachs investor conference.

The “strong” level of care older Americans are seeking out suggests that people are getting more comfortable getting the procedures they put off during the pandemic, the UnitedHealth Group executive said. The insurer is incorporating this higher level of demand into the prices it sets for plans it offers next year in the private market for health insurance for older Americans, known as Medicare Advantage.

The stocks of health insurance companies tumbled on Wednesday following the warning. UnitedHealth, which has a market cap of $424 billion, fell 7%. Humana, which also has a large business caring for Medicare members, slumped 13.5%. Elevance Health slid 7% and CVS Health, which owns Aetna, declined 6%.

doctor changes knee replacement bandage

A doctor attends to a patient’s knee replacement bandage.Jodi Jacobson/Getty Images

The warning boosted the stocks of hospital operators and medical-device makers on Wednesday. The health systems HCA and Tenet were up 3% and 4% respectively. Medical technology companies like Stryker and Medtronic jumped 5% and 3% respectively.

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