Sick HMOs?

From Daily Briefing

Medicare claims hammer Humana

Another HMO has hit the wall. Humana (HUM) on Wednesday became the second big health insurer this week to warn Wall Street about sharply lower-than-expected earnings. The Louisville, Ky.-based company said it expects to make 44 to 46 cents a share for the first quarter, down from its previous guidance of 80 to 85 cents a share. Humana expects to make $4 to $4.25 a share for the year, below its earlier projection of $5.35 to $5.55.
Unlike WellPoint (WLP), whose shares plunged Tuesday after the insurer warned of rising claims expense, Humana is blaming higher-than-expected claims on its Medicare Part D business. But the weak forecast from Humana could lead to more selling in names like Aetna (AET), which saw its shares drop 10% yesterday even after the company reaffirmed its own earnings guidance. Suddenly the health insurance stocks aren’t looking like such a good hedge play in a weakening economy.