US managed care stocks generally outperformed the broader insurance industry during the second quarter.
The nation's biggest health insurers closely mirrored the performance of the S&P 500, which rose 4.13% in the second quarter, and outpaced the S&P Insurance Index, which declined 2.27%.
After facing down high Medicare Advantage costs in recent quarters, Humana Inc. rose the most during the second quarter. Its shares climbed 6.3% in the period, closing at $373.65 on June 30. Elevance Health Inc. and UnitedHealth Group Inc. also saw their stock values increase in the quarter, rising 5% and 4%, respectively.
The Medicare Advantage woes felt by many managed care insurers over the last year have stabilized some, thanks in part to updated pricing, according to S&P Global Ratings analyst Francesca Mannarino.
"I think insurers have prepared themselves for the most part and most have shifted to a focus on the margin versus membership play," Mannarino said. "The focus is going to be on margins versus membership going forward, just to get back to what they feel is an appropriate margin for the sector."
While the outlook for the second quarter is broadly stable and positive, Mannarino said that Medicaid redeterminations also posed a headwind for insurers as they navigate the complicated process and membership loss.
After being delayed for several years amid the COVID-19 pandemic, states began individually assessing who qualified for the government subsidized plans in April 2023, in some cases procedurally unenrolling thousands.
While this may have contributed to a surge in Affordable Care Act enrollments, Mannarino said upcoming second-quarter earnings releases may shed some light on the financial impact on insurers a year later.
"I think this is going to be an ongoing process, because you have those procedural disenrollments coming back in, but I think just as far as the sector seeing just higher acuity play out it's just a matter of whether rates keeping up with that trend," Mannarino said.
Not all major managed care insurers saw their stock values rise in the second quarter, as both The Cigna Group and Centene Corp. saw their prices dip.
Centene's stock took the most significant plunge, falling 14.7% to $66.30 per share by June 30 from $77.75 per share on April 1.
When announcing first-quarter earnings figures during the end of April, Centene CEO Sarah London highlighted a more-than-double growth in the company's marketplace plans, which are offered via the Affordable Care Act, in the last two years.
However, London also emphasized the heightened Medicare Advantage costs and criticized payments established by The Centers for Medicare and Medicaid Services earlier the same month. Managed care insurers had roundly criticized the 3.70% increase in payments as too low to address rising costs.
"Longer term, Medicare Advantage remains an important business for Centene," London said during the April call. "The strategic link between Medicare and Medicaid has only become more explicit since our last earnings call."
Cigna's stock value fell 9.2% during the second quarter, with the decline largely happening after first-quarter earnings figures released in May detailed a $277 million loss related to its VillageMD subsidiary.