(Reuters) -Health insurer Humana on Wednesday reported lower-than expected medical costs in the first quarter, allaying some investor concerns after industry bellwether UnitedHealth’s disappointing financial results earlier this month.
Humana’s shares rose 4.7% to $271.50 in premarket trading after the company also beat profit estimates by a large margin, helped by a delay in certain administrative expenses.
Shares in the health insurance sector have been volatile since UnitedHealth on April 17 missed quarterly estimates for the first time since 2008, in part due to high healthcare demand among older adults, which drove up costs in its Medicare Advantage plans.
Humana, however, said its medical costs were within expectations. The medical cost ratio in its insurance segment – the percentage of premiums spent on medical care – came in at 87.4% for the quarter, compared with analysts’ estimates of 87.5%, according to data compiled by LSEG.
The company is a top provider of U.S. government’s Medicare Advantage (MA) plans, meant for people aged 65 and older, and those with disabilities.
Humana said its MA plans are performing as anticipated to date, and it was progressing on its decision to exit certain unprofitable counties.
The U.S. government in April announced a 5.06% average increase in its final 2026 reimbursement rates for health insurers for MA plans. The rate is more than double the preliminary rates announced earlier this year.
Humana said the reimbursement rates better reflect the current trend of higher costs and “should enable greater stability within the industry.”
The rates influence the monthly premiums private health insurers charge, the benefits they offer and, ultimately, their profits.
On an adjusted basis, Humana earned a profit of $11.58 per share in the first quarter, above analysts’ average estimate of $10.07.
It also reaffirmed its 2025 adjusted profit forecast of about $16.25 per share.
(Reporting by Sneha S K in Bengaluru; Editing by Shinjini Ganguli)
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