The healthcare giant is grappling with persistent industry challenges, which executives expect to continue into 2025.

UnitedHealth Group's stock fell nearly 8% on Tuesday following the release of its third-quarter earnings report. Despite beating expectations on revenue and earnings, the company failed to impress Wall Street with its overall 2024 outlook. 

The healthcare giant is grappling with persistent industry challenges, which executives expect to continue into 2025.

Medicare & Medicaid Struggles Continue

On the earnings call, UnitedHealth executives highlighted challenges in Medicare Advantage and Medicaid, as industry-wide headwinds showed no sign of easing. CEO Andrew Witty acknowledged that Medicare’s annual enrollment period, which began the same day, presents significant challenges, but he expressed confidence in the company’s preparation.

“As we come into this cycle, I think we’re seeing the benefits of thoughtful, calm, and non-reactive planning from last year. It puts us in a strong position for this year, but we’ll see how the cycle progresses,"  Witty said.

Tim Noel, CEO of UnitedHealthcare Medicare and Retirement, echoed Witty’s comments, noting that the company’s long-term planning helps it handle the current cost pressures, payment cuts, and regulatory changes more rationally. 

"In today’s environment, a rational response to pricing and regulatory challenges is more critical than ever," he added.

Medicaid, too, remains a sore spot, with executives noting that the unwinding process will likely continue to impact performance for the remainder of the year.

Challenges Persist

UnitedHealth reported $6.06 billion in profit for the third quarter, up from $5.8 billion in the same period last year. 

However, cumulative profit for the first nine months of 2024 stood at $8.9 billion, down nearly half from $16.9 billion during the same period in 2023. 

Despite these declines, the third-quarter profit numbers exceeded Wall Street’s expectations.

The company's revenue also surpassed forecasts, reaching $100.8 billion for the third quarter, compared to $92.4 billion in the prior-year quarter. Total revenue for the first three quarters of 2024 was reported at $299.5 billion, an increase from $277.2 billion through the first nine months of 2023.

Despite strong performance, concerns around industry pressures weighed heavily on investors. Witty reaffirmed the company’s guidance for 2024 earnings per share (EPS), which is expected to be between $27.50 and $27.75. 

This is in line with earlier forecasts but includes the impact of a 75-cent per share hit due to business disruptions caused by a cyberattack on Change Healthcare.

UnitedHealth’s Optum Drives Growth

UnitedHealth’s Optum division continued to be a significant growth driver, with revenues reaching $63.9 billion in the third quarter, up from $56.7 billion in Q3 2023. 

Optum Health saw a $2.1 billion increase, bringing its total revenue to $25.9 billion, attributed to growth in value-based care enrollment and expanded care offerings.

Optum Rx also saw substantial gains, with revenues rising by $5.4 billion to $34.2 billion. The pharmacy benefit manager boosted its relationships with existing clients and expanded its services, particularly in specialty and community-based pharmacies. Adjusted scripts at Optum Rx increased to 410 million, up from 380 million last year.

In contrast, UnitedHealthcare's commercial insurance segment saw growth in its domestic offerings, adding 2.4 million members for a total of 29.7 million. Total medical membership stood at 50.7 million as of the end of the third quarter, including 9.4 million Medicare Advantage members.

“We’ve grown significantly, driven by the innovative products and services that our people deliver daily,” Witty noted.

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