Health and Science

Insurer UnitedHealth warns of cost rebound after strong quarterly profit

Key Points
  • UnitedHealth warned of rising costs later this year as Americans catch up on less urgent surgeries halted by the coronavirus pandemic.
  • The insurer stuck to its full-year forecast after a strong second quarter.
  • The company's medical loss ratio — the percentage of premiums paid out for medical services — touched historic lows of 70.2% in the quarter ended June 30, compared with 83.1% a year earlier.
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UnitedHealth posts Q2 EPS beat due to 'temporary deferral of care' during pandemic

UnitedHealth on Wednesday warned of rising costs later this year as Americans catch up on less urgent surgeries halted by the coronavirus pandemic and stuck to its full-year forecast after a strong second quarter.

Hospitals rescheduled elective surgeries to reduce the burden on the health-care system as coronavirus cases surged, while some patients canceled appointments to avoid contracting the respiratory illness caused by the virus.

The company's medical loss ratio — the percentage of premiums paid out for medical services — touched historic lows of 70.2% in the quarter ended June 30, compared with 83.1% a year earlier.

The ratio came in better than analysts' estimate of 78.38%, according to IBES data from Refinitiv.

However, UnitedHealth maintained its full-year adjusted profit forecast of $16.25 to $16.55 per share, saying demand for health care began to recover in May and approached more typical levels by the end of the second quarter.

"There is still a high degree of uncertainty, especially with some states reversing reopening due to rising COVID-19 cases," Evercore ISI analyst Michael Newshel said.

UnitedHealth also said future results are expected to be weighed down by the assistance measures already taken. The company has given premium credits and other discounts totaling $1.5 billion to some members because of the decline in medical claims due to the pandemic.

The company's core business that sells health insurance plans brought in $49.1 billion in sales, a 1% percent rise from a year earlier.

Growth in that unit was offset by declines in the number of people who subscribed to its employer-sponsored health plans, due to widespread job losses during the pandemic.

Excluding items, the company reported earnings per share of $7.12.