Health insurers facing financial pressure have been hit hard as older patients are seeking more medical care than expected. CVS, the owner of health insurer Aetna, recently lowered its profit outlook due to potential higher medical costs affecting its profits. This warning came soon after Humana issued dismal 2024 earnings guidance, citing the same factor.
The spike in medical costs for Medicare Advantage patients has been attributed to more elderly patients returning to hospitals for procedures they had postponed during the pandemic, such as joint and hip replacements. Medicare Advantage, a privately run health insurance plan, has been a significant source of growth and profits for the insurance industry. With over half of Medicare beneficiaries enrolled in such plans, the rising costs have investors concerned about the potential impact on profitability.
Executives at CVS mentioned seeing an increase in outpatient care rates and the use of supplemental benefits, leading to higher medical expense ratios for the company. Humana, on the other hand, reported an even bigger jump in medical costs, particularly in inpatient care, affecting its insurance segment significantly. This has led to discussions about a potential split of 23andMe’s consumer and therapeutics businesses in an effort to boost stock prices. The company faces a potential delisting from the exchange if it fails to bring its share price back above $1.
Amazon’s health care units have also been hit with layoffs, raising concerns about the stability of the health care industry. The aggressive cost-cutting efforts by CEO Andy Jassy have led to job cuts across various divisions of the company, including its pharmacy and One Medical units.
As the health care industry continues to face financial challenges, the impact of rising medical costs on insurers and companies like 23andMe and Amazon remains a topic of concern for both investors and consumers. The potential repercussions of these financial challenges on the overall health care landscape are yet to be fully understood.