UnitedHealth Reports Solid 3Q Despite Rising COVID Costs

by Leslie Small

 

UnitedHealth Group's third-quarter 2021 financial results impressed Wall Street, with equities analysts describing the company's performance as "solid across the board" and "generally positive" even though the company did see health care costs related to COVID-19 rise during the quarter.

A look at the numbers:

• UnitedHealth Group reported an adjusted earnings per share (EPS) of $4.52 for the third quarter, beating the Wall Street consensus of $4.41. The firm's revenues increased 11% year over year to $72.3 billion. And the company's medical loss ratio for the quarter was 83%, slightly beating the consensus estimate of 83.4% but representing an increase compared to last year's 81.9%.
• "The results appear solid, as [UnitedHealth] continued to perform well, and we believe this should also represent a positive read-thru for the rest of the managed care group," Oppenheimer's Michael Wiederhorn wrote in an Oct. 14 research note.
• On the subject of the pandemic, Chief Financial Officer John Rex noted that UnitedHealth's updated full-year earnings outlook "includes unfavorable COVID impacts consistent with the expectations we have discussed throughout the year."
• "During the third quarter, while direct COVID care and testing costs ran above the expectations we had nearly a year ago, we again saw elective care offsetting the impact of higher case rates, much like the previous cycles in the pandemic," Rex said.
• Specific to the company's insurance business, UnitedHealthcare, Rex said the third quarter brought "increasing member growth in commercial offerings, particularly in employer-sponsored benefits."
• Rex noted that UnitedHealthcare's Medicare Advantage membership has grown by 745,000 so far this year, adding that the number of people served by managed Medicaid grew by 1 million members in the third quarter compared to the prior-year period.

Update on the Change Healthcare deal:

• During the earnings call, UnitedHealth President and Chief Operating Officer Dirk McMahon also addressed UnitedHealth's pending purchase of data analytics company Change Healthcare. In recent months, some news reports have indicated that the Dept. of Justice may sue to block the deal on antitrust grounds.
• "We continue to work diligently to satisfy regulatory requests and now believe, based on our experience so far, the transaction should close in the first part of 2022," McMahon said. Previously, the company had said it expected the transaction to close in second half of 2021.

From Health Plan Weekly