- UnitedHealth Group reported third-quarter earnings on Friday that beat Wall Street expectations as the payer posted a lower-than-feared medical loss ratio. The insurer’s stabilizing medical costs followed an unexpected surge in outpatient utilization for seniors earlier this year that spooked investors.
- The payer’s MLR — the share of premiums spent on healthcare costs — was 82.3%. Medical costs were up compared to 81.6% last year, but lower than 83.2% in the second quarter. UnitedHealth expects its medical costs to rise in the fourth quarter as patients weather seasonal illnesses and other factors, said UnitedHealth CFO John Rex on a Friday earnings call.
- UnitedHealth raised its 2023 adjusted net earnings per share outlook by about 1% to $24.85 to $25, up from its prior projections of $24.70 to $25. The insurer reported $8.5 billion of profit on revenue of $92.4 billion for the third quarter.
UnitedHealth’s stabilizing medical costs come after the insurer and other payers like Humana reported in June that higher medical costs stemming from seniors opting in to delayed medical care could cut into profits.
The payer’s medical costs for seniors were in-line with levels seen in the second quarter, driven by utilization in outpatient orthopedic and cardiac procedures, Rex said. UnitedHealth’s lowered MLR was also driven by an expected lower utilization of medical services in the third quarter that was largely driven by seasonal variations. However, the payer expects its MLR to increase in the fourth quarter due to a rise in infectious diseases like influenza and RSV, the CFO added.
UnitedHealth, which is considered a bellweather for other payers, has added nearly 700,000 members to its commercial business this year. It expects to serve an additional one million people with commercial benefits, and one million more Medicare Advantage members by the end of this year, Rex said.
The company’s insurance arm, UnitedHealthcare, reported revenue growth of 13% year over year, notching almost $70 billion in the third quarter and beating analyst estimates, according to a TD Cowen report. The insurer reported profit of $4.6 billion.
However, UnitedHealth’s health services business Optum reported mixed results. Although Optum’s revenue of $56.7 billion beat Wall Street expectations, the payer’s value-based care unit, Optum Health, reported operating profit at $1.57 billion that was 15% below analyst expectations, according to the TD Cowen report.
UnitedHealth CEO Andrew Witty said the payer is experiencing unexpected medical care complexity in the approximately 900,000 fully accountable lives Optum Health serves.
“As I said back in the last call, we're very, very pleased to have that growth that we believe that is really foundational for future long-term growth of [Optum Health],” Witty said on the investor call. “However, within that the mix of that population is a little different to what we expected.”
UnitedHealth also elaborated on its strategy for GLP-1 weight loss drugs that have exploded in popularity over the last year.
The payer reported that its employer clients are grappling with the drug’s high list prices while recognizing the potential for the drugs to be “another tool in the toolbox” to help members manage their weight.
“We recognize [GLP-1s] have potential benefits, but we're struggling and, frankly, our clients are struggling, with the list prices which have been demanded of these products in the U.S., which are running at about 10 times the level of price which are being paid in Western Europe,” Witty said.
UnitedHealthcare CEO Brian Thompson noted that the vast majority of its GLP-1 coverage is in its fee-based arm that represents less than a third of its business.
“As we look forward, are our customers considering to cover more or less? I would say it's a mixed bag, some are seeking coverage — albeitt, dissatisfied with the price points. Some are backing off given the cost, but I wouldn't really be directional one way or the other,” Thompson said.
Witty noted that the payer is focused on making the drugs more affordable, and that the payer’s pharmacy benefit arm, OptumRx, is continuing to negotiate with manufacturers.
“So overall, I'd say that is our focus is to try and find a way to make this a sustainable and affordable space for our clients to support,” the CEO said.