What happened
Shares of several health insurers were sinking on Wednesday. Centene (CNC -2.22%) stock was down 7.9% as of 12:13 p.m. ET, while CVS Health (CVS -0.22%) and Humana (HUM -1.77%) shares were falling 6.1% and 13.9%, respectively.
The declines for each of the health insurance stocks stemmed from comments made by an executive of rival UnitedHealth Group (UNH 0.30%) at the Goldman Sachs Global Healthcare Conference. Reuters reported that Tim Noel, CEO of UnitedHealthcare Medicare and Retirement, said at the conference that his company is seeing an increase in the volume of elective surgical procedures for older Americans.
During the worst part of the COVID-19 pandemic, many seniors delayed their planned elective procedures. Noel stated, "We're seeing that more seniors are just more comfortable accessing services for things that they might have pushed off a bit like knees and hips."
So what
What's so concerning about higher numbers of elective procedures? They could push medical costs higher for health insurers. Higher costs could translate to lower earnings.
Humana's share price fell the most on Noel's comments. That's probably in large part because the stock was performing the best among its peers so far this year.
In April 2023, Humana reported better-than-expected first-quarter results. The company attributed these results to "robust membership growth and favorable inpatient utilization trends" in its Medicare Advantage business. Those positive utilization trends could be jeopardized if Humana experiences the same increase in elective procedures among seniors that UnitedHealth Group is seeing.
Centene focuses heavily on the Medicaid and Medicare markets. After posting solid Q1 results in April, the company increased its full-year earnings outlook. That guidance could be harder to achieve if medical costs rise significantly.
CVS Health's Aetna unit would probably feel the negative impact of higher numbers of elective procedures, just as UnitedHealth Group, Humana, and Centene would. However, its stock dropped the least of the group.
The reason CVS Health stock fared somewhat better than the others is simple. The company generates only around 30% of its total revenue from its healthcare benefits segment, which includes Aetna. CVS' biggest moneymaker is its health services segment, which features its pharmacy benefits management business and medical clinics. The company's pharmacy and consumer wellness segment, which includes its retail pharmacies, is another major revenue source.
Now what
It's possible that investors are overreacting to the comments made by UnitedHealthcare's Noel at the Goldman Sachs conference. The increase in elective procedures for older Americans might not be as bad as some are thinking.
We'll have a better idea about how much higher medical costs might be when the major health insurers announce their next quarterly results. UnitedHealth Group should be the first to provide its Q2 update in July. Centene, CVS Health, and Humana won't be far behind, though.
Keep in mind, too, that any spike in elective procedures should be temporary. The dips in these stocks could present good buying opportunities for long-term investors.
