Health Insurance Stocks Have Fallen in 2024

Rough Year For Big Six Payors

The “Big Six Payors” Cigna, CVS Health (Aetna), Humana, UnitedHealth Group (UNH), Elevance Health, and Centene—are collectively experiencing a challenging year in the markets, reflecting a broader shake-up in the healthcare industry. The year-to-date (YTD) declines in their stock prices, as of now, paint a concerning picture of the sector’s outlook. Let’s break down the numbers and explore what this means for these major players and the industry as a whole.

The Declines in Perspective

• Cigna: Down 8.6% YTD

Cigna’s modest decline compared to its peers can be attributed to relatively stable earnings and diversification in its Evernorth health services division. However, rising medical costs and pressure on Medicare Advantage margins have dampened investor sentiment.

• CVS Health: Down 45% YTD

CVS has been hit hardest among the Big Six. The company’s heavy investment in healthcare delivery through acquisitions like Oak Street Health and Signify Health has yet to deliver meaningful returns. Combined with Medicare Advantage reimbursement pressures and pharmacy headwinds, CVS finds itself in a precarious position.

• Humana: Down 45.7% YTD

Like CVS, Humana has struggled due to rising costs in Medicare Advantage. The company’s focused play in senior care has been both its strength and vulnerability. Concerns over its narrow reliance on this segment, coupled with regulatory scrutiny, have led to steep losses in market valuation.

• UnitedHealth Group (UNH): Down 6.7% YTD

UNH’s decline is relatively modest, thanks to its size and diversification across healthcare delivery and technology. However, even the industry leader has faced challenges with cost inflation, particularly in outpatient services and value-based care arrangements. Medicare Advantage, Medicaid and potential PBM regulation has been the major headwinds.

• Elevance Health: Down 22.1% YTD

Elevance, formerly Anthem, has seen significant pressure from medical cost trends and concerns about growth in Medicaid enrollment as pandemic-related coverage protections unwind. The company has struggled to balance its government-sponsored and commercial insurance portfolios.

• Centene: Down 22% YTD

Centene’s focus on Medicaid and Affordable Care Act (ACA) markets has made it vulnerable to reimbursement changes and higher utilization rates. The company’s strategy to divest non-core assets has yet to boost investor confidence.

Industry-Wide Headwinds

1. Rising Medical Costs: The post-pandemic healthcare landscape has seen a surge in utilization rates, with outpatient services and surgeries driving higher costs. This has pressured insurers to either absorb costs or pass them onto consumers and employers, both of which have consequences.