UnitedHealth Boosts Earnings Forecast, Warns Medical Costs Could Rise Next Year

UnitedHealth Chief Executive

Andrew Witty

suggested that financial analysts’ current projections for 2023 were roughly in line with the company’s planned guidance, “with the current consensus at the top of our likely initial earnings outlook range.” The company continues to aim for its long-term goal of 13% to 16% annual earnings growth, he said, and it expects strong expansion of its Medicare business.

But the CEO and other UnitedHealth executives warned that they expect medical costs will likely increase faster than the historic rate next year, pushed up by inflationary pressures including rising costs of living, capacity constraints and labor market tightness. The company said it was planning and pricing for the increase, which would come even as the impact of Covid-19 has been reduced.

Mr. Witty said UnitedHealth is working to limit cost increases and is having an impact, but “there are some unavoidable pressures in the macro environment.”

The company’s signal of rising healthcare costs—and likely increases in premiums for employers—is the latest sign of how rising labor costs and other expenses are starting to ripple through the healthcare economy. Premiums for many consumers buying health plans on the Affordable Care Act exchanges are expected to rise significantly in 2023.

UnitedHealth also said it hasn’t yet seen evidence of recessionary trends in the economy, and it saw clients adding to their head counts in the third quarter. Still, the company said it is watching for any signs of a possible economic downturn.

For the third quarter, UnitedHealth said quarterly revenue came in at $80.9 billion, with growth of 11% from its UnitedHealthcare business, which served an additional 850,000 people in the third quarter compared with last year, and 17% at Optum Health, its health-service arm.

Earnings swelled to $5.26 billion, or $5.55 a share, from $4.09 billion, or $4.28 a share, in the same quarter a year ago. Stripping out one-time items, the company said earnings were $5.79, topping analyst estimates of $5.43, according to FactSet.

UnitedHealth raised its adjusted earnings guidance for the year to a range of $21.85 to $22.05 a share, a 30 cent jump from the midpoint of its previous guidance. The company has raised its earnings outlook in each of the last three quarters. 

Shares rose 2.2% to $521.11 in late morning trading.

UnitedHealth is the first healthcare heavyweight to report its earnings this season, with

Elevance Health Inc.

set to report next week and others following in late October and early November.

The report comes less than a month after UnitedHealth prevailed against the Justice Department in an antitrust challenge to its $13 billion acquisition of health-technology firm Change Healthcare. A federal judge rejected the federal government’s assertion that the deal would suppress competition in the health-insurance market.

The judge ordered UnitedHealth, which owns the largest U.S. health insurer and healthcare operation, to divest business assets related to claims-processing, but otherwise denied the government’s bid to block the transaction. UnitedHealth closed its acquisition of Change in early October.

In July, the company said it plans to eliminate copayments and other out-of-pocket charges for patients in certain plans on some widely used drugs, such as insulin and the anti-overdose treatment naloxone, starting in early 2023.

Write to Anna Wilde Mathews at [email protected] and Dean Seal at [email protected]