HUM - Humana: Medicare Advantage Will Never Be As Profitable As It Was
2024-06-23 02:45:35 ET
Summary
- The healthcare sector, led by insurance stocks, has faced chronic underperformance since 2020 as premiums fail to keep up with costs.
- Humana has faced significant pressures, losing over 30% of its value since last fall, ending its post-ACA bull market.
- Most expect Humana's profit margins to recover to their historical levels. However, that would require increased government spending and higher premium costs, which may be untenable in this economy.
- I expect Humana's utilization rate to continue trending up due to declines in health status, particularly for older Americans, since 2020.
- I believe 2% profit margins are the new normal for Humana, with historical levels mainly coming from the temporary post-ACA market dislocations.
While most stocks have steadily risen, specific industries have been stuck in years of stagnation. The healthcare sector, led by insurance stocks, has faced chronic underperformance. For example, the iShares U.S. Healthcare Providers ETF ( IHF ) has not risen since 2021, as the insurance industry struggles with increasing costs and stagnated premiums. Humana ( HUM ) has faced large pressures among the major firms, losing over 30% of its value since last fall....
Humana: Medicare Advantage Will Never Be As Profitable As It Was