Foundation Health Tumbles 23% on Costs

Shares in Foundation Health Systems Inc., one of California’s biggest health insurers, plunged as much as 23% as the company said higher-than-expected medical costs will cause earnings to fall short of forecasts. Shares of Woodland Hills-based Foundation fell $1.88 to close at $7 on the New York Stock Exchange after touching a record low of $6.88. The provider of managed-care plans told analysts during the last few weeks that earnings will fall short of forecasts because it costs more to pay the medical expenses of the more than 6 million people the company insures than it had previously forecast. At least three analysts cut their earnings estimates for the company, said Foundation Health spokesman David Olson.