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US health insurer shares fall after UnitedHealth flags Medicaid medical use

FILE PHOTO: The corporate logo of the UnitedHealth Group appears on the side of one of their office buildings in Santa Ana, California

By Amina Niasse

NEW YORK (Reuters) - Shares of U.S. health insurers fell on Wednesday after UnitedHealth Group's chief executive said the company was keeping an eye on medical services used by Medicaid members, which could drive up costs.

CEO Andrew Witty identified the performance of Medicaid as something worth watching given the program's membership turnover in multiple quarters.

Medicaid plans, which serve low-income people, were required during the COVID-19 pandemic to keep enrollees continuously in plans. That policy, which began in March 2020, was terminated in April 2023, prompting each state to reassess who was eligible for coverage.

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UnitedHealth shares ended 3.8% lower at $484.72, while shares of rivals Humana, Centene and Elevance Health closed down 1.1%, 3.1% and 2.6%, respectively.

"We have come through this very prolonged redetermination cycle in Medicaid making sure that the utilization and rates stay in perfect synchrony," Witty said at the Bernstein investor conference. He said they expected "some disturbance" around this but did not elaborate.

KFF, formerly the Kaiser Family Foundation, estimated that as of May 23, 22 million people had been disenrolled from Medicaid and the CHIP insurance program for children, and that 22 million renewals were still under way. About 49 million had their coverage renewed.

"Investors have already been grappling with the mismatch between rates and costs in Medicare Advantage over the past year, and it now seems like this dynamic may also now be manifesting more prominently on the Medicaid side of the house, too," Stephens analyst Scott Fidel wrote in a note.

In addition to Medicaid plans for people with low income, UnitedHealth and other insurers manage health plans for the U.S. Medicare program for people aged 65 and older or with disabilities.

The insurers were surprised in late 2023 and early 2024 by increased healthcare use within those plans.

(Reporting by Amina Niasse in New York; Additional reporting by Mariam Sunny in Bengaluru; Editing by Bill Berkrot and Matthew Lewis)