UnitedHealth (UNH.N) projected a more significant impact on this year’s earnings due to a February hack at its tech unit, Change Healthcare.
This breach has prompted the company to notify customers and provide loans to affected health providers, while efforts are ongoing to restore full operations.
The hack, one of the most severe in the American healthcare industry, disrupted payments to doctors and healthcare facilities.
According to UnitedHealth CFO John Rex, billing channels remain compromised for some providers.
As a result, the company anticipates a 30-cent increase in the full-year adjusted profit impact due to the disruptions caused by the hack, mainly stemming from the loan program and notification expenses.
Sensitive information exposed in the attack likely includes health insurance member IDs, patient diagnoses, treatment data, and Social Security numbers.
This breach has had widespread repercussions across the industry, leading to higher medical costs for UnitedHealth, which temporarily suspended the prior authorization process for some insurance plans during the hack.
Despite this, the company plans to resume share buybacks in the second half of the year, Rex stated.
UnitedHealth’s shares rose by 4.2% to $537.68 in early trading.
The company’s quarterly profit exceeded expectations, driven primarily by its healthcare services unit, Optum.
UnitedHealth reported an adjusted quarterly profit per share of $6.80, surpassing analysts’ predictions of $6.66 per share, based on LSEG data.
Revenue from its Optum services unit increased by approximately 12% to $62.9 billion in the second quarter.
The medical care ratio, a critical measure of medical costs, was 85.1% in the second quarter, above the anticipated 84.40%.
Insurers have faced elevated medical costs as a turnover in Medicaid plan enrollees has shifted towards sicker patients.
During the COVID-19 pandemic, insurers were required to maintain Medicaid enrollment, complicating projections for medical use rates.
This trend is expected to stabilize through 2025 as utilization rates are updated throughout the year, Rex explained.
James Harlow, senior vice president at Novare Capital Management, noted that while medical costs were elevated, they were not alarming for UnitedHealth.
Shares of other health insurers, such as Humana (HUM.N) and Elevance Health (ELV.N), also saw marginal increases in morning trading.