UnitedHealth Group beat Wall Street targets for quarterly profit and raised its annual forecast on Friday, as the healthcare giant banks on membership growth in its federal government-backed health insurance plans.
UnitedHealth is among the largest players in the Medicare Advantage market, where private insurers offer an alternative to the original Medicare – the federal government’s health insurance plan for people aged 65 and older or those with certain disabilities.
The industry bellwether’s strong Medicare outlook offers some relief at a time when health insurers are bracing to lose some members in their Medicaid plans – which cover healthcare costs for people with low incomes – as states remove pandemic-era guidelines to keep members continuously enrolled.
Medicare and Medicaid memberships make up a third of UnitedHealth’s health insurance business.
Shares of the Dow component were up nearly 1% at $530 before the bell.
Meanwhile, a slow recovery in non-urgent procedures helped lower medical costs at its insurance unit, driving the company’s first-quarter profit above expectations.
Health insurers stand to benefit as inflation and labor shortages threaten to hinder the number of non-urgent procedures that hospitals perform during the year, potentially leading to lower costs from medical claims.
The company’s medical cost ratio – the percentage of payout on claims compared with premiums – came in at 82.2%. Analysts had estimated 82.54%, according to Refinitiv IBES data.
UnitedHealth raised its adjusted 2023 profit forecast to between $24.50 and $25 per share, compared with its earlier estimate of $24.40 to $24.90 and market expectations of $24.94.
Excluding items, it reported a quarterly profit of $6.26 per share, beating estimates of $6.13.