Lawsuit fells managed care stocks
Written on February 15, 2008
Shares of major managed care companies fell Wednesday after New York Attorney General Andrew Cuomo said he is suing a health insurer, its parent and some subsidiaries, and sent subpoenas to 16 other insurers.
Cuomo said he will sue Ingenix, its parent UnitedHealth Group Inc. and three subsidiaries, saying the insurers are defrauding consumers by manipulating how much doctors and hospitals are reimbursed.
Cuomo also sent 16 subpoenas to insurance companies including Aetna Inc., Cigna Corp. and Empire Blue Cross Blue Shield, the state’s largest health insurer. The case contends that insurance companies are underpaying consumers who use out-of-plan doctors.
No company or individual has been charged with wrongdoing.
Nonetheless, investors appeared concerned about the sector, which underperformed the broader markets.
UnitedHealth Group (UNH, Fortune 500) fell sharply to a new annual low and nearly all of the company’s peers fell as well.
In a note to investors, Citi Investment Research analyst Charles Boorady noted how rare it is to find large health insurers in breach of regulations since they are so highly regulated.
"It is extremely rare to find a material breach among large health plans that have significant legal and compliance controls and procedures in place free instant credit score estimator. Thus, we don’t have prior art to rely on for what to expect in this case," he said.
UnitedHealth shares fell 3.7% Wednesday after dropping to a 52-week low of $44 earlier in the day. Previously, the stock ranged between $45.82 and $59.46.
Shares of Humana Inc. (HUM, Fortune 500) fell 1.8%. WellPoint Inc. (WLP, Fortune 500) lost 1.6%, while Aetna (AET, Fortune 500) fell 2.6%. Coventry Health Care Inc. (CVH, Fortune 500) fell 2.1%, while Cigna (CI, Fortune 500) edged slightly lower Wednesday.
Filed in: economics.