Investing.com -- Shares of Humana Inc . (NYSE:HUM) plummeted 13% in premarket trading today, following a 20% plunge in UnitedHealth Group Inc. (NYSE:UNH), which revised its earnings forecast downward. The ripple effect of UnitedHealth’s announcement was felt across the health insurance sector, with Elevance Health Inc. (NYSE:ELV) falling 10%, CVS Health Corp. (NYSE:CVS) dropping 7%, Cigna Corp . (NYSE:CI) declining 3.5%, and Molina Healthcare Inc . (NYSE:MOH) sinking 7.6%.
The driver behind the widespread declines was UnitedHealth’s unexpected cut to its earnings outlook for the current fiscal year, citing significantly higher-than-anticipated medical costs in Medicare. This adjustment represents a departure from the company’s usual practice of conservative forecasting, which typically sees upward revisions as the year unfolds.
UnitedHealth’s announcement came as a surprise to investors and analysts alike, especially given that the company had confirmed its forecast just three months prior. The sharp increase in medical costs caught the health-care heavyweight off guard towards the end of the first quarter, leading to a rare guidance cut.
This news has cast a shadow over the sector, with Humana and its peers experiencing a sell-off in response to the market’s reassessment of risks associated with rising medical expenses.
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