The world\u2019s largest healthcare insurer issued a self-diagnosis Tuesday: UnitedHealth\u2019s second-quarter results call for lots of paracetamol, as an ongoing cost crisis is set to drag on profits and make headaches for executives.<\/p>\n
Rising costs forced the company to withdraw its guidance earlier this year, and it returned<\/a> Tuesday with a disappointing downgrade for its adjusted earnings forecast: at $16 a share for 2025, well short of the $20 Wall Street was hoping for. Shareholders who didn\u2019t join the selloff as UnitedHealth fell 7.5% Tuesday may want some Tylenol of their own, especially if they\u2019re holding other insurers.<\/p>\n The Cost of Doing Healthcare Business<\/p>\n Overall revenue isn\u2019t the issue at UnitedHealth, which has over 50 million health plan subscribers at its UnitedHealthcare health insurance business. In the second quarter, the company raked in $111.6 billion, $13 billion better than a year earlier and, actually, besting Wall Street\u2019s expectations.<\/p>\n Like in every line of business, however, it\u2019s the margins in healthcare that separate the unwell from the healthy, and margins at UnitedHealth shrank to 3.1% in the second quarter, down from 4.3% a year earlier. The knock-on effect was not great: Adjusted earnings in the quarter, at $4.08 a share, were down 14% year over year and substantially below analysts\u2019 estimates of $4.45. Executives conceded their initial cost projections \u2014 medical costs are expected to be $6.5 billion more than previously expected \u2014 will continue to drag through the year. One key metric says it all:<\/p>\n Investors closely watch the so-called medical care ratio of insurers, which tracks the percentage of premiums spent on patient care. UnitedHealth\u2019s rose to 89.4% in the second quarter, an increase from 85.1% a year earlier. The company said Tuesday that it expects the ratio to hang around 89.25%, give or take 25 basis points, for the rest of 2025, which is a far cry from figures in the lower 80s that generally make executives and investors comfortable.<\/p>\n Staffing shortages, rising prescription drug use, and costly new therapies have driven<\/a> inflation in the medical sector higher than economy-wide inflation in recent years, putting pressure on health providers and insurers. At the same time, UnitedHealth became a poster child for mismanagement at the worst time, especially for its failure to anticipate spiraling costs in its Medicaid and Medicare Advantage plans. The result has been a nearly 48% decline in share value this year.<\/p>\n Pain to Go Around: UnitedHealth has been criticized for the severity of its blunders in anticipating costs, but the sector-wide problem is being felt elsewhere. Last week, insurer Centene posted<\/a> a surprise quarterly loss because of cost issues, while Oscar Health said<\/a> it expects operating losses of $200 million to $300 million this year, after previously expecting to make $225 million to $275 million. Molina Healthcare also trimmed<\/a> its annual guidance last week, while earlier this month, Elevance Health did the same<\/a>, with both citing rising costs.<\/p>\n","protected":false},"excerpt":{"rendered":"The world\u2019s largest healthcare insurer issued a self-diagnosis Tuesday: UnitedHealth\u2019s second-quarter results call for lots of paracetamol, as…\n","protected":false},"author":2,"featured_media":34776,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34],"tags":[64,63,137,500,4631,8192,14970],"class_list":["post-34775","post","type-post","status-publish","format-standard","has-post-thumbnail","category-healthcare","tag-au","tag-australia","tag-health","tag-healthcare","tag-insurance","tag-medicare","tag-unitedhealth"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/34775","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=34775"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/34775\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/34776"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=34775"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=34775"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=34775"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}