UnitedHealth shares plunged 17.4% premarket on Thursday after the insurer dramatically slashed its profit forecast for the year after it revealed disappointing earnings.
The healthcare company – whose top insurance executive was shot dead in midtown Manhattan in December – cut its full-year adjusted earnings outlook to a range of $26 to $26.50 per share, down from $29.50 to $30 a share.
The firm also reported adjusted income of $7.20 a share in the first quarter, below analysts’ expectations of $7.29, according to FactSet.
Andrew Witty, the firm’s chief executive, acknowledged that UnitedHealth “did not perform up to our expectations.”
“We are aggressively addressing those challenges to position us well for the years ahead, and return to our long-term earnings growth rate target of 13 to 16%,” he continued.
The company blamed high medical costs in its Medicare business, saying they extended far above the expected increase, particularly within physician and outpatient services.
Higher costs among Medicare Advantage enrollees flew under the radar until the end of the first quarter, UnitedHealth said.
The firm also cited changes in the patients being treated under its Optum healthcare branch. UnitedHealth saw “unexpectedly minimal 2024 beneficiary engagement” as insurance plans exited markets, and a larger impact than anticipated from “ongoing Medicare funding reductions enacted by the previous administration.”
UnitedHealth could soon feel some relief, however, since the Trump administration earlier this month announced it would increase payment rates for Medicare insurers next year. The policy change is expected to generate more than $25 billion in additional revenue across the industry.
UnitedHealth also assured it believes the setbacks “to be highly addressable over the course of this year” as it looks toward 2026.
The company reported net income of $6.85 a share, up from a loss of $1.53 a share last year.
It recorded revenue of $109.6 billion, up nearly $10 billion from $99.8 billion the year before.
UnitedHealth said it served 780,000 additional customers so far this year.
