U.S. health insurer Humana Inc said on Wednesday there was an unexpected pick-up in the rate of hospital admissions late in March and in April, sparking a sell-off in its own and other insurers' shares.
The comments came during a conference call to discuss the company's first-quarter profit, which missed Wall Street expectations.
Shares in Humana, which specializes in Medicare health insurance and drug plans for the elderly and disabled, fell more than 6 percent to $168.66 and brought down larger competitors, including UnitedHealth Group Inc, Aetna Inc and Anthem Inc.
Investors are keeping a close watch on insurers and hospitals for signs that medical use and costs are rising more rapidly than expected, which can hurt insurer profits and help hospitals.
Humana Chief Financial Officer Brian Kane said hospital inpatient admissions were on the rise, the first such cautionary comments from an insurer this quarter.
"During the last weeks of the quarter and into April, we are seeing an elevated level of authorizations for hospital admissions, which, although still declining, are slightly higher than we had anticipated," Kane said.
He said a lower per-admission cost was encouraging, but that the company would be watching admissions closely.
UnitedHealth shares fell 3.7 percent to $113.19, Aetna was down 2.5 percent to $107.65 and Anthem - which also reported earnings on Wednesday - fell 2.5 percent to $150.38.
Sheryl Skolnick, healthcare analyst at Mizuho Securities, said insurer shares were already under pressure and that the comments seemed to be speeding the decline.
Humana also gave a more dour forecast than its competitors for its individual insurance business, which has grown with the creation of the public exchanges under the national healthcare reform law. In particular, Humana said more Georgia residents needed care than it had anticipated.
Georgia accounts for about half of Humana's individual business, based on state insurance data, Goldman Sachs analyst Matthew Borsch said in a research note.
Excluding tax benefits from the sale of Concerta Inc, Humana earned $2.47 per share, below the average analyst estimate of $2.56 per share, according to Thomson Reuters I/B/E/S.
CLAIMS COSTS RISE
The company said the medical benefit ratio (MBR) for the first quarter ended March 31 increased by 80 basis points to 83.1 percent. The measure represents the percentage of premiums paid out in medical claims.
Revenue increased 18.1 percent to $13.8 billion, beating the average analyst estimate of $13.51 billion.