WellPoint Warned, Now Humana... Blame The 2008 Election (HUM, WLP, AET)

First we saw an earnings warning out of WellPoint (NYSE: WLP) which hurt that stock and most shares in the health insurance field yesterday.  WellPoint cited several factors, including medical costs, lower fully insured enrollment, and an overall weak economy. 

Now we have a warning out of Humana (NYSE: HUM).  The blame here is being put on an analysis of pharmacy claims.  Humana’s numbers look worse with estimates for Q1 being put at $0.44 to $0.46 EPS instead of its prior range of $0.80 to $0.85.  Its full year is now put at $4.00 to $4.25 instead of its prior $5.35 to $5.55 estimate. 

Humana shares opened lower by 25% to under $35.00 in pre-market trading, which will mark a 52-week low and more than half off from its $88.10 highs over the last year.  Shares fell from $over $62 to $47.38 yesterday after WellPoint warned.

The real culprit here may be something far more simple, although this will likely be denied by the insurance industry.  It is an election year and there is a larger chance for government-mandated universal coverage in some form or fashion than there has been in recent election years.  Some insurance professionals believe that in an election year insurance companies don’t like to raise rates so that healthcare costs are not out of control around as voters hit the polls.  Insurance executives keeping up with election coverage already know that healthcare and health insurance rank among the top issues candidates discuss.  This is starting to look all too familiar.

So far, Aetna (NYSE: AET) claimed that it was maintaining its guidance while competitors have lowered numbers.  There is still a lot of the calendar left for 2008.

Douglas A. McIntyre
March 12, 2008