UnitedHealthcare signage is displayed on an office constructing in Phoenix, Arizona, on July 19, 2023.
Patrick T. Fallon | Afp | Getty Images
UnitedHealth Group on Tuesday issued a 2025 outlook that fell wanting Wall Street’s expectations, as the corporate’s insurance unit continues to grapple with higher medical costs.
Shares of UnitedHealth Group fell roughly 4% in premarket trading on Tuesday.
The corporate anticipates it should post 2025 adjusted earnings of at the very least $16 per share, with revenue of $445.5 billion to $448 billion. Wall Street analysts had expected 2025 adjusted profit of $20.91 per share, and full-year revenue of $449.16 billion, in line with consensus estimates from LSEG.
On top of upper medical costs, the updated outlook removes about $1 billion from “previously planned portfolio actions” that the corporate isn’t any longer pursuing, UnitedHealthcare CEO Tim Noel said during an earnings call on Tuesday. He didn’t provide specifics on those actions.
UnitedHealth Group said it expects to return to earnings growth in 2026.
The stock tumbled in May after the corporate suspended that 2025 guidance as a result of elevated medical costs and announced the abrupt departure of former CEO Andrew Witty. The report Tuesday adds to a growing string of setbacks for the corporate, which owns the nation’s largest and strongest insurer, UnitedHealthcare, and is usually viewed because the industry’s bellwether.
The corporate expects its insurance unit’s 2025 medical care ratio — a measure of total medical expenses paid relative to premiums collected — to are available in between 89% and 89.5%. A lower ratio typically indicates that an organization collected more in premiums than it paid out in advantages, leading to higher profitability.
For the second quarter, that ratio increased to 89.4% from 85.1% through the year-earlier period, primarily as a result of medical costs. The corporate said health-care expenses through the quarter went up much faster than what it charged in premiums. On top of that, Medicare funding cuts also made things worse.
Analysts had expected that ratio to are available in at 89.3% for the quarter, in line with StreetAccount estimates.
UnitedHealth Group’s report signals that elevated medical costs in Medicare Advantage plans may not ease anytime soon for the broader medical health insurance industry. UnitedHealthcare, the insurance arm of UnitedHealth Group, is the nation’s largest provider of those privately run Medicare plans.Â
Higher expenses in Medicare Advantage plans have dogged insurers over the past 12 months as more seniors return to hospitals to undergo procedures they’d delayed through the Covid-19 pandemic, reminiscent of joint and hip replacements.
“Once we prepared our 2025 Medicare Advantage offerings back in the primary half of 2024, we significantly underestimated the accelerating medical trend and didn’t modify advantages or plan offerings sufficiently to offset the pressures we at the moment are experiencing,” Noel said through the call.
Noel said physician and outpatient care collectively represented 70% of the pressure on medical costs up to now this 12 months. But inpatient care also accelerated through the second quarter, and the corporate expects it should account for a “relatively large portion of the pressure” over the complete 12 months, he added.
UnitedHealthcare continues to see more patients use ER and statement stays, with more services being offered and bundled as a part of each visit, Noel said.
Here’s what UnitedHealth Group reported for the second quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:Â
- Earnings per share: $4.08 adjusted vs. $4.48 expected
- Revenue: $111.62 billion vs. $111.52 billion expected
The corporate posted net income of $3.41 billion, or $3.74 per share, for the quarter. That compares with net income of $4.22 billion, or $4.54 per share, through the year-earlier period.
Excluding certain items, adjusted earnings were $4.08 per share for the quarter.
UnitedHealth raked in $111.62 billion in revenue for the second quarter, up greater than 12% from the identical period a 12 months ago as a result of growth inside UnitedHealthcare and the corporate’s Optum unit. That segment includes Optum Health, which provides care and recommends providers, and pharmacy profit manager Optum Rx.
Despite higher medical costs, UnitedHealthcare generated $86.1 billion in revenue for the second quarter, up 17% from the identical period a 12 months ago. Analysts expected UnitedHealthcare to book $84.89 billion for the period, StreetAccount estimates said.
While Optum Rx revenue jumped nearly 19% to $38.46 billion, Optum Health’s second-quarter revenue fell 7% year-over-year to $25.21 billion. The corporate’s ownership of an insurer, a pharmacy profit manager and care providers has allowed it to dominate the industry, however the decline in Optum Health has drawn Wall Street’s attention.
“We all know Optum’s performance has not met expectations. We’re refocused on fundamental execution to make sure we meet our potential to assist make the health system work higher for everybody,” said Dr. Patrick Conway, Optum’s CEO, in the discharge.
The corporate expects the general Optum unit to rake in 2025 sales of $266 billion to $265.7 billion.
UnitedHealth’s response to DOJ investigation
Notably, the report comes just days after UnitedHealth revealed it’s complying with Department of Justice investigations into its Medicare billing practices.Â
Noel on Tuesday said the corporate is expanding its efforts to watch its business practices and stop extra costs for consumers.
“We now have stepped up our audit, clinical policy and payment integrity tools to guard customers and patients from unnecessary costs,” he said, adding that the corporate is using AI tools to enhance patient and provider service experiences and save costs.
In the course of the earnings call, UnitedHealth Group’s recent CEO Stephen Hemsley acknowledged that the corporate and other insurers face “continuing public controversy over long-standing practices.”
He added that beyond the “environmental aspects” affecting your entire sector, “we now have made pricing and operational mistakes, and others as well. “
“They’re getting the needed attention. Our critical processes, including risk status, care management, pharmaceutical services and others are being reviewed by independent experts and so they shall be reviewed yearly and reported on,” he said. “And these processes may be reviewed at any time by outside stakeholders.
Those experts include Evaluation Group and FTI Consulting, Hemsley said. He added that the corporate expects the review to be accomplished by the top of the third quarter this 12 months, with plans to release a primary report on the findings within the fourth quarter.
“While we imagine in our oversight and the integrity of those processes, wherever they’re determined to be at variance with prescribed practice, they shall be promptly remediated and we’ll proceed on this path,” he added.
It marks UnitedHealth’s first earnings report under Hemsley, who’s tasked with restoring investor confidence and turning around a struggling company that has continued to attract heavy public scrutiny in recent months. Shares of UnitedHealth Group are down greater than 44% for the 12 months, fueled partly by the DOJ’s investigations and its suspended outlook.Â
The corporate’s 2024 wasn’t any higher. It grappled with the murder of UnitedHealthcare’s CEO, Brian Thompson, the torrent of public blowback that followed and a historic cyberattack that affected hundreds of thousands of Americans.Â
