Health insurers sink as rising spending gauge alarms investors

Bloomberg

Health-insurance stocks sank across the board after Anthem Inc became the third insurer to report it is paying out a higher percentage of the premiums it takes in to cover patients’ medical claims.
Investors watch the so-called medical-loss ratio reported by health insurers closely. The number is a key measure of the companies’ financial health; when the ratio goes up, it can suggest that money is leaving the companies faster than it is arriving. Other issues, such as changes in tax law, can also affect the ratio.
Anthem shares fell as much as 7.4 percent, the biggest intraday drop in three months, after the company said that its medical-loss ratio had climbed to 86.7 percent in the second quarter, from 83.4 percent a year earlier. Analysts had expected a ratio of 85.7 percent, according to data compiled by Bloomberg.
Over the past week, UnitedHealth Group Inc and Centene Corp also reported year-over-year increases of the measure. Shares of those companies sank by as much as 3.9 percent and 3.6 percent, respectively, on Wednesday.
Shares of large health insurers — many of which also operate large pharmacy-benefit management units — had gained after the Trump administration dropped a plan to overhaul a rebate system often blamed for keeping drug prices elevated.
The S&P 500 managed-care index is still up 17 percent since hitting a 52-week low on April 17.
Anthem, UnitedHealth and Centene all reported otherwise favorable results, beating analysts’ estimates and raising their outlooks for the year.
Anthem, which operates Blue Cross Blue Shield commercial plans in 14 states, said the increase in its medical-loss ratio was due to changes in a health insurance tax and dynamics in its Medicaid business in a handful of states.