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UnitedHealth improves outlook, sees less impact of Covid-19 costs next year

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UnitedHealth Group Inc.

A H 4.21%

raised its annual outlook for 2021 and said the effects of the pandemic on its results matched its expectations, with costs related to Covid-19 being offset by moderate demand for elective health care procedures.

The health insurance and healthcare giant, the first major managed care company to release third quarter results, forecasts 2021 profit after adjustments of $ 18.65 per share to 18 . $ 90 per share, up about 22 cents at midpoint. range from its previous guidelines.

UnitedHealth said its results are consistent with its earlier projection of the impact of Covid-19 on 2021 earnings. The company had said the pandemic would hurt earnings by around $ 1.80 per share.

UnitedHealth also offered a first look at its forecast for 2022. CFO John Rex said analysts’ current consensus estimates were reasonable, but likely towards the higher end of the company’s initial projections for adjusted earnings. next year. According to a FactSet survey, analysts expect annual net income of $ 20.75 per share for 2022 and earnings of $ 21.64 per share after adjustments.

UnitedHealth expects a lower impact of Covid-19 care costs next year, compared to 2021, Rex said.

The CFO also said UnitedHealth will stick to its long-term projection of annual earnings per share growth of 13% to 16%.

UnitedHealth chief executive Andrew Witty, 56, did not participate in his call for results, due to what the company said was an “urgent but simple procedure” last night for a kidney stone. UnitedHealth said the process went smoothly and the CEO will resume full duties in a few days.

The increase in insurance membership along with the expansion of Optum’s health services business fueled growth in the third quarter, the company said.

Revenue for the quarter reached $ 72.34 billion, up 11% year-over-year. Company earnings, stripped of depreciation and tax effects, were $ 4.52 per share. On average, analysts expected revenue of $ 71.35 billion and adjusted earnings of $ 4.41 per share, according to the FactSet survey.

Most of the revenue growth came from higher premiums, which rose 12% to $ 56.97 billion.

The company’s UnitedHealthcare insurance business saw membership growth from both more business customers and more members on Medicare and Medicaid plans. The increase in membership, which has grown by nearly two million since 2020, has helped boost bonuses this year.

The company’s medical loss ratio, a closely watched measure of the proportion of premiums paid for medical care, was 83%, which was better than analysts had generally expected.

Mr Rex said UnitedHealth recorded around 60,000 hospitalizations related to Covid-19 in the third quarter, peaking at nearly 30,000 in August and declining in September. Currently, around 5,000 people covered by UnitedHealth are receiving inpatient treatment for conditions related to Covid-19, he said, down about 50% from the highest level seen in the quarter.

The Delta variant increased cases in parts of the country over the summer, especially in places where vaccination rates were relatively low. Cases have started to decline in many of these areas, although some states are seeing increases.

Mr Rex said UnitedHealth continued to see a pattern of patients downgrading their usual healthcare when Covid-19 became more prevalent, and vice versa. UnitedHealth said rates of scheduled procedures such as colonoscopies and joint replacements were steadily returning to normal levels.

An analyst, in asking a question, referred to a Wall Street Journal article on a recent report by the Office of the Inspector General of the federal Department of Health and Human Services. The report focused on risk adjustment, a key process that affects payments to insurers under the Medicare Advantage program. Tim Noel, managing director of UnitedHealthcare Medicare & Retirement, said the company believed the risk adjustment model was valuable and “something to build on and widely support.”

Revenues for Optum, the company’s health services arm, also increased. In the last quarter, revenue increased 14% year-over-year, with revenue per customer improving as Optum expands its services.

OptumRx, the pharmacy benefits division of Optum, saw its prescriptions increase 6% year over year. It’s another sign that more and more people are seeking health care again after skipping doctor visits for issues unrelated to Covid-19 last year.

Write to Anna Wilde Mathews at anna.mathews@wsj.com and Matt Grossman at matt.grossman@wsj.com

Corrections and amplifications
Tim Noel, CEO of UnitedHealthcare Medicare & Retirement, said the company believed the risk adjustment model was valuable and “something to build on and widely supported.” An earlier version of this article wrongly attributed this statement to UnitedHealth President Dirk McMahon. (Corrected October 14)

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