Care costs keep climbing for UnitedHealth

The medical cost challenges that have challenged insurers in 2024 will not be going away in 2025, UnitedHealth Group executives said

The nation's largest insurer reported its fourth-quarter and full-year 2024 earnings Jan. 16. UnitedHealth Group's medical loss ratio was 85.5% in 2024, up from 83.2% in 2023. 

CFO John Rex told investors on a Jan. 16 call that several factors accounted for about 70% of the increase in medical costs year over year. The company's Medicare Advantage plans did not grow as expected in 2024, Mr. Rex said, leading to a different profile of consumers than UnitedHealth expected. Medicaid redeterminations also left the company with a higher-need membership. 

The Change Healthcare cyberattack, which cost the company $3.1 billion in 2024, also contributed to the rising medical loss ratio, Mr. Rex said, as did the sale of UnitedHealth's South American business. 

Rising drug costs and increased coding activity from hospitals also contributed to the rising costs, he said. 

The company said it expects its medical loss ratio to increase to around 86.5%. UnitedHealth also expects to see similar medical costs in 2025 to 2024, Mr. Rex told investors. The Inflation Reduction Act and continued risk adjustment changes in Medicare Advantage will also contribute to the rising expenses, he said. 

The company has cut its operating costs as medical costs rise, Mr. Rex said.

"Some of these advances are the result of the very early-stage impacts we are beginning to realize from AI-driven initiatives to help our customer service representatives respond to consumers' needs more effectively and quickly," he said. "We see continuing opportunities, both in the near term, with operating costs for '25 improving further, and well beyond, given the rapidly expanding scope and impact of these initiatives." 

UnitedHealth reported net earnings of $14.4 billion in 2024, down 35.6% from 2023.

Other insurers have contended with rising costs as well. Humana and CVS Health both cut back their Medicare Advantage offerings for 2025 as prices rose. Other major insurers, including Elevance Health and Centene, have reported a similar mismatch in Medicaid reimbursement rates and costs as UnitedHealth. 

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