Humana (NYSE:HUM) stock is up nearly 10% in 2020, and is now trading at its all-time high. Humana is coming off an exceptional earnings report in which the company beat handily on both the top and bottom lines. And institutional investors seem to be taking a keen interest in HUM stock. Additionally, Humana along with other health insurers got a nice Christmas gift in December 2019 with the elimination of the Obama-era Health Insurance Fee (HIF).
Humana looks set to thrive in a post-pandemic world in which telehealth will allow patients to get safe and convenient access to medical care. However, HUM stock has a 12-month consensus price of around $422. And although more recent price targets are higher, the bullish argument about Humana is based on the argument that Humana members will pay increased premiums for government-backed Medicare plans.
However, Humana’s first-quarter earnings report only captured the very beginning of the coronavirus pandemic. And although Humana did not adjust its forward guidance for 2020, it raises a paradox. The growth of telehealth services should allow patients to have access to care throughout the pandemic, and that bodes well for the post-pandemic fortunes for Humana. On the other hand, though, the pandemic is also causing many patients to put off elective surgeries that may be becoming more urgent for them and for the hospitals.
Hospitals Are Expanding Procedures, but Patients May Still Be Scared
When the nation first went into lockdown, an article appeared in The Atlantic that helped outline the problem. According to Gerard Doherty, the chair of the surgery department at Boston’s Brigham and Women’s Hospital said there are three basic categories of surgeries.
According to Doherty, 25% of surgeries, such as joint replacement procedures, are truly elective. This means, the procedure could truly be delayed indefinitely with only mild to moderate inconvenience to the patient.
Doherty labeled another 25% of surgeries as urgent. Procedures such as serious heart problems have continued to be performed throughout the lockout.
However, that leaves 50% of surgeries that fall into a grey category. These surgeries may not be urgent, but they are important. And they can impact both the physical and mental health of many would-be patients.
And many of those potential patients are putting off those surgeries. However, since the economy is starting to re-open, that should be no problem, right? Well maybe not.
Americans Have Done Their Job … Maybe Too Well
Public opinion about the lockdown policies has gotten muddy to say the least. This is particularly true as it relates to the Americans who can now elect to have surgical procedures.
Many Americans are still concerned about exposing themselves to the virus. However, there is also a concern about being an asymptomatic carrier that exposes health care workers. And that means, in some cases, putting off or continuing to put off procedures.
However, these procedures often decide whether a hospital is profitable — and hospitals need the revenue now. But hospitals themselves are putting out mixed messages. On the one hand, they are welcoming an expansion of procedures, but they are also expressing concern about a second surge of Covid-19 cases and a shortage of the personal protective equipment (PPE) for their doctors and nurses.
This supports a point my colleague Josh Enomoto made in a recent article. 60% of Americans are afraid to go grocery shopping. It’s not hard to make the leap that they would put off elective medical procedures.
Overall, though, it’s not just elective procedures. According to Julie Lonborg, a senior vice president with the Colorado Hospital Association, patients are having to go to the emergency rooms because they are waiting too long to seek care.
“Hospital emergency departments are a safe place for patients who need to seek care,” said Lonborg. “Delaying care during a heart attack or stroke can mean the patient can’t make a full recovery.”
Hum Stock Should Be Fine, but It’s Not a Certainty
With so much uncertainty, it’s understandable that investors will want to look for a sure thing. And by being an undisputed leader in a segment that is only going to increase in importance, HUM stock looks like a good bet.
However, the reality of a post-pandemic world is that there is no such thing as a sure thing. Also, let’s not forget this is an election year — and health-related stocks typically underperform in an election year. Yes, it appears that Medicare-For-All is off the table, but that doesn’t mean there won’t be changes in store for health insurers regardless of the election outcome.
Therefore, HUM stock may be the best of the bunch, but it’s a wait-and-see for me.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019 As of this writing, Chris did not hold a position in any of the aforementioned securities.