LIVE MARKETS-Medical cost pressures to follow US health insurers into 2025, Fitch says

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MEDICAL COST PRESSURES TO FOLLOW U.S. HEALTH INSURERS INTO 2025, FITCH SAYS

U.S. health insurers will continue to be pressured by elevated medical costs into the first half of 2025 as insurers negotiate reimbursement rates and implications from elections remain uncertain, ratings agency Fitch said on Friday.

Health insurers stocks are likely to end the year in the red - with Humana HUM.N declining more than 44% so far in 2024, while UnitedHealth UNH.N falling 3.5% year-to-date.

The industry has spent most of the year grappling to contain costs due to higher demand from members enrolled in government-backed Medicare Advantage $(MA)$ plans for older adults or those with disabilities.

Costs have also been a pain point for insurers such as Centene CNC.N and Elevance ELV.N that offer Medicaid plans meant for low-income Americans, after a pandemic era federal policy ended last year, and left them with more sick patients.

Fitch says discussions with individual states about setting reimbursement rates for next year should eventually take into consideration the higher levels of care.

Centene has said it expects costs to ease next year as the "mismatch" or a gap between what states pay insurers to cover Medicaid members and the amount spent this year on care for the members minimizes.

Insurers that offer Medicare Advantage such as Humana have priced their 2025 plans better than 2024 to account for higher medical care demand, and have exited their least profitable markets, according to Fitch.

The agency believes the MA business will be a strong source of revenue growth for health insurers in the coming years as the U.S. population ages and more members become eligible to enroll.

(Sneha S K)

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