Written by Sriparna Roy, Mariam Sani and Amina Niasse
(Reuters) – UnitedHealth Inc on Tuesday forecast a bigger hit to its annual profit from a February hack at its technology unit, but maintained its full-year earnings forecast.
Shares of the Minnetonka, Minnesota-based company rose about 6% to $544.32 after it beat Wall Street estimates for second-quarter earnings and indicated it would resume share buybacks after pausing them due to the hack.
The cyberattack on the health care group’s Change Healthcare (NASDAQ:) unit was one of the worst to hit the U.S. health care industry and disrupted payments to doctors and health care facilities.
Billing channels still haven’t returned to normal for some providers, UnitedHealth (NYSE:) Chief Financial Officer John Ricks said on a conference call.
The company said it expects its full-year adjusted earnings to rise 30 cents a share due to disruptions caused by the breach, primarily due to a loan program to help providers affected by the breach, and notification costs. UnitedHealth reiterated its full-year adjusted earnings forecast of $27.50 to $28 a share.
The company did not disclose how many people were affected, but said the hackers may have stolen data from a third of Americans.
The breach had far-reaching implications for the entire industry, and led to higher medical costs for UnitedHealth after it suspended pre-approval for some insurance plans.
The Medicare ratio, a measure of medical costs, came in at 85.1% in the second quarter, beating expectations of 84.40%.
Costs are up, but size is not a concern.
Insurance companies faced rising medical costs as the turnover of people enrolled in Medicaid plans shifted toward sicker patients.
During the pandemic, insurers have had to keep Medicaid members enrolled. Insurers have struggled to predict medical utilization rates as states redefine eligibility for low-income Americans after the policy ends in 2023.
This trend is expected to stabilize through 2025 as usage rates update throughout the year, Rex said.
The company’s medical costs have risen, but not enough to worry UnitedHealth, said James Harlow, senior vice president at Novari Capital Management.
UnitedHealth shares rose after the company didn’t identify any new trends in higher-than-expected health care spending, said Stevens analyst Scott Wedel. He said its higher quarterly costs reflected transient events, such as the Cheng hack and the sale of its South American operations.
Shares of other health insurers, including Humana (NYSE:HUMANA) and Elevance Health, rose 2-3% in morning trading.
UnitedHealth reported adjusted quarterly earnings of $6.80 per share, beating analysts’ expectations, helped by growth in its health care services unit. Analysts had expected quarterly earnings of $6.66 per share, according to LSEG data.
Revenue from its Optum services unit rose about 12% to $62.9 billion in the second quarter.