UnitedHealth’s 4th-quarter medical costs surge to highest level since early pandemic
UnitedHealth, the nation’s largest health insurer, attributes Medicare Advantage claims for much of the increased costs, as well as high December COVID-19 hospital admissions, driven by a more infectious variant.
Health insurer UnitedHealth closed 2023 with a medical loss ratio of 85% in the fourth quarter, which was its highest ratio since the pandemic began in early 2020. The company’s medical costs, its largest expense, jumped to $62.23 billion in the quarter, up from $53.6 billion at the end of 2022.
Medicare Advantage claims were responsible for much of the increased costs. UnitedHealth covers about 7.7 million people with Medicare Advantage plans, and many of them received heart and orthopedic outpatient procedures, UnitedHealth said. Later in the quarter, it also saw an increase in seasonal activity as more seniors sought vaccinations for the respiratory virus RSV, which sometimes led patients to receive additional care. “Seniors did really respond strongly to RSV vaccinations and scheduled physician visits,” CFO John Rex said.
Several other factors also contributed to higher costs. COVID-19 activity was higher than in past quarters. In December, UnitedHealth’s total number of COVID-19 hospital admissions was 50% to 60% higher than its October average, Rex said. COVID-19 cases, emergency room visits and hospitalizations have been ticking up in the United States, driven by a more infectious variant known as JN.1. COVID-19 admissions for inpatient stays were more expensive than usual in the fourth quarter, Rex said, likely because of more-intense cases requiring hospitalization.
UnitedHealth, as the nation’s largest health insurer and the first to share earnings, generally sets the stage for other managed care companies’ earnings each reporting season. The company’s medical loss ratio “will likely raise recent cost trend concerns for the rest of the managed care group,” according to J.P. Morgan analyst Lisa Gill.
However, company leaders stressed that the rising costs will not affect their expectations for 2024. UnitedHealth said in late November that it expects adjusted earnings to range between $27.50 and $28 per share in the new year. Overall, UnitedHealth’s profit climbed nearly 15% to about $5.5 billion in the final quarter of 2023, and the company earned more than $22 billion on the year.
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UnitedHealth provides health insurance for more than 47 million people in the United States. It also provides care, pharmacy benefits management and technology services through its Optum segment.