By Dean Seal

Shares of Humana are slipping after UnitedHealth Group cut its outlook due to problems with Medicare Advantage plans, which make up a big part of Humana's business.

The stock was down 7% at $265.71 in the morning session. It was trading at around $323 this time a year ago.

The decline is milder than the 23% nosedive UnitedHealth stock took after its first-quarter earnings missed Wall Street estimates. The healthcare bellwether cut its 2025 earnings guidance in light of higher-than-expected medical costs in its Medicare business.

The higher costs were partially driven by issues with how Medicare Advantage plans are paid, along with federal changes that cut payments tied to certain diagnoses. UnitedHealth Chief Executive Andrew Witty also said federal Medicare Advantage payment rates have been set too low in recent years, creating a snowball effect for the entire insurance industry.

The Medicare woes may spell trouble for Humana, which has more exposure to Medicare Advantage than its healthcare peers. The program accounts for about 38% of Humana's total medical membership and about 81% of revenue, Mizuho analysts said in a research note last week.

Companies including CVS Health and Elevance Health have a smaller exposure to the program. Their shares were down about 2% to 3%, respectively, in the first half of the trading day.

Write to Dean Seal at dean.seal@wsj.com

(END) Dow Jones Newswires

April 17, 2025 11:59 ET (15:59 GMT)

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