UnitedHealth Shares Fall as Medical Costs Remain Elevated

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UnitedHealth Shares Fall as Medical Costs Remain Elevated
HEALTH INSURANCEUNITEDHEALTH GROUPMEDICAL COSTS
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UnitedHealth Group Inc.'s stock declined after medical expenses continued to rise in the fourth quarter, surpassing revenue forecasts. The company attributed the increase to specialty drugs and hospital billing practices. Despite the higher costs, UnitedHealth maintained its 2025 outlook and reported adjusted earnings above Wall Street expectations.

UnitedHealth Group Inc. shares declined after medical costs remained elevated in the fourth quarter, falling short of revenue expectations. The stock dropped as much as 5.2% in early trading Thursday before recovering to a 3.6% decrease. Other health insurance providers, including Elevance Health Inc. and Humana Inc., also experienced downward trends. The company reported a medical-loss ratio of 87.6% for the fourth quarter, indicating the percentage of premiums paid out for patient care.

Investors generally view a lower ratio more favorably. Increased medical expenses, coupled with stricter government payment regulations, have been putting pressure on the earnings of US health insurers for over a year. UnitedHealth's results demonstrate that these trends persist. However, the company maintained its 2025 outlook, issued six weeks ago, stating that the higher costs are already factored into its guidance.RBC Capital Markets analyst Ben Hendrix noted that fourth-quarter medical costs significantly exceeded even recently revised estimates. He emphasized that investors would be looking for reassurance from management during the earnings call that the company's projected measure for 2025 remains on track. UnitedHealth's commentary on utilization patterns and premium rates, particularly progress in aligning with Medicaid acuity, will be closely scrutinized during the earnings call. This assessment aims to gauge whether the assumptions underpinning the maintained 2025 forecast are overly conservative. Revenue from premiums fell 2.5% below consensus expectations, contributing to the shortfall in adjusted operating income for the fourth quarter, despite lower medical costs. UnitedHealth, which operates the largest health insurer in the US, is the first in the sector to release earnings and serves as a benchmark for the industry. The company attributed the rise in medical costs to specialty drugs and hospital billing practices, factors previously highlighted in October. Notably, despite the tragedy involving the murder of a top executive in New York last month, UnitedHealth's adjusted earnings surpassed Wall Street's expectations in its first financial report since the incident. The company reported earnings of $6.81 per share for the quarter, compared to the average analyst estimate of $6.71 surveyed by Bloomberg. Revenue reached $100.8 billion, slightly below projections. The shooting and subsequent online response brought attention to industry practices like claims denials and prior authorizations, along with concerns about profits and heightened security measures

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