Written by Leroy Leo and Puyan Singh
(Reuters) – UnitedHealth Group Inc. on Tuesday gave a 2025 profit forecast that was lower than Wall Street expectations, sending its shares down 8% on expected pressure across its government-backed health insurance business.
The largest U.S. health insurer expects profit of up to $30 per share. That cap was below analysts' expectations of $31.18 per share, according to LSEG data.
UnitedHealth CEO Andrew Whitty said on a conference call with analysts that government payments for Medicare plans and lower state payment rates for low-income Medicaid plans are contributing to the , said it has set its outlook for next year “more conservative than in previous years.” The company said it would release more detailed forecasts in December.
Demand for medical services under the government's Medicare plan for people over 65 and people with disabilities has increased since late last year, as many seniors opted for procedures they had put off during the coronavirus pandemic. It is rapidly increasing.
The company, like other health insurance companies, faces rising medical costs as Medicaid enrollees leave the company, leaving insurers with more sick patients.
“(UnitedHealth) has historically provided conservative guidance initially, but today's guidance reflects a backdrop of industry uncertainty and cost trends,” Mizuho analyst Anne Hynes said in a note. I think there are,” he said.
The insurance bellwether's comments also pushed down the stock prices of rivals Humana, CVS Health, Elevance and Centene by about 2% to 5%.
The outlook also takes into account hospitals seeking higher reimbursements from insurers, and Chief Financial Officer John Rex said insurers are “aggressively responding.” said.
UnitedHealth's third-quarter medical costs exceeded Wall Street expectations. This was because the company's payments increased due to strong demand for medical services, while reimbursements under government-backed plans were low.
The company also lowered its 2024 adjusted earnings forecast by 25 cents, in part due to a 10 cents per share loss related to the February cyber attack on UnitedHealth's technology unit Change Healthcare. The price was $27.75 per share.
The company now expects to have a business interruption impact of $705 million, or about 75 cents a share, this year due to the hack that caused massive payout and other disruptions across the United States.
UnitedHealth issued billions of dollars in loans to providers affected by the hack and covered costs associated with notifying customers of the breach.
Change is also trying to attract new customers after losing business to a smaller rival and becoming inoperable.
Despite rising health care costs, UnitedHealth posted adjusted earnings 15 cents above Wall Street expectations, driven by member growth across its businesses.
(Reporting by Puyan Singh, Leroy Leo and Amina Niasse in Bengaluru; Editing by Shinjini Ganguly and Bill Berkrot)