Health insurance stocks pay the price as more people seek elective care

TheStreet's J.D. Durkin brings the latest business headlines from the floor of the New York Stock Exchange as markets close for trading Thursday, January 18.

Related: Humana plunges on major health insurance warning; UnitedHealth, CVS tumble

Full Video Transcript Below:

J.D. DURKIN: I'm J.D. Durkin, reporting from the New York Stock Exchange. Stocks were in the green to close out today's session.

The Dow closed 200 points higher, the Nasdaq closed 1.3 percent higher, and the S&P closed up eight-tenths of a percent. This comes as big tech stocks led the major averages higher. Apple won today after Bank of America upgraded the stock, calling for a 20 percent increase in the stock price over the next twelve months.

Separately, investors are also reacting to comments from Atlanta Fed President who said that interest rate cuts likely wouldn't come until the third quarter, unless there is convincing evidence of inflation’s decline.

In other news, some of the country’s largest health insurance providers are seeing stocks drop deep into the red. UnitedHealth, Humana, and CVS Health have all warned investors about sliding shares due to higher medical costs.

A major reason why these companies are concerned is the rise in elective and non-emergency medical procedures. These types of procedures took a back seat during the height of the COVID pandemic, but they are now eating into profits. Another is an increase in COVID-related hospital admissions.

The medical-cost ratio – which is the amount of customer premiums insurance companies have to pay out for medical care – is going up. Investors are worried that patients will continue to use more services than previously anticipated. Both Humana and UnitedHealth saw their medical-cost ratio increase by about one percent year-over-year.

Also plaguing insurance companies is the FTC’s continued investigation into how prescription drugs are priced and the Biden administration’s continued pledge to lower costs for patients.

That’ll do it for your daily briefing. From the New York Stock Exchange, I’m J.D. Durkin with TheStreet.