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UnitedHealth sees a 'disturbance' in Medicaid - as insurers' stocks plunge

By Eleanor Laise

As more than 20 million people are moved off Medicaid rolls, insurers are left with rate uncertainty

Shares of major health insurers dropped sharply Wednesday after UnitedHealth Group Inc. executives forecast a "disturbance" in its Medicaid business and addressed patients' utilization of healthcare services at an investor conference.

The industry has come through a "prolonged redetermination cycle in Medicaid," UnitedHealth CEO Andrew Witty said at a Bernstein conference Wednesday morning, referring to the process states use to ensure that Medicaid enrollees are still eligible for coverage under that program. Ensuring that healthcare utilization and rates are in "perfect synchrony through a multi-quarter cycle, you know, there's probably going to be some disturbance around that," Witty added.

Addressing patients' utilization of healthcare services, there's "not a lot of visibility" since the company's last public update, Brian Thompson, CEO of UnitedHealth's insurance unit, said at the conference. That's partly because of the cyberattack on the company's Change Healthcare unit, Thompson said, and the resulting delays in processing claims. UnitedHealth also temporarily relaxed its utilization management programs due to the hack. "May and June will be telling for us," Thompson said, in terms of gaining a clearer picture of utilization trends.

The executives' comments "will create concern that there is risk to 2024 estimates" for UnitedHealth, Mizuho Securities analysts said in a note Wednesday, while also generating uncertainty for other companies exposed to Medicaid.

UnitedHealth's stock (UNH) fell more than 4% Wednesday, while other major Medicaid players Centene Corp. (CNC), Elevance Health Inc. (ELV), and Molina Healthcare Inc. (MOH) dropped roughly 3% to 5%.

Over 20 million people have lost Medicaid coverage since April of last year, when states were allowed to resume disenrolling people who were no longer eligible for the program, according to health policy research nonprofit KFF. Previously, a pandemic-era law gave states extra federal funding in exchange for keeping people enrolled in Medicaid.

Overall disenrollment resulting from this Medicaid "unwinding" process has been roughly in line with industry expectations, but investors are watching whether the current rates are high enough to cover the remaining enrollees - particularly given that the people who lost the coverage were likely healthier, the Mizuho analysts said in the report Wednesday.

While UnitedHealth's comments weighed on major insurers, hospital stocks got a boost. HCA Healthcare Inc. shares (HCA) gained 2.3%, while Universal Health Services Inc. shares (UHS) climbed 2.8%.

UnitedHealth's stock has dropped 8.7% in the year to date, while the S&P 500 SPX is up 10.6%.

-Eleanor Laise

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


(END) Dow Jones Newswires

05-29-24 1318ET

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