UnitedHealth brought in a record $400.3 billion in revenue in 2024 despite a string of crises for the nation’s largest healthcare company, including a massive cyberattack, heavy congressional and regulatory scrutiny and the shooting of its top insurance executive.
However, UnitedHealth’s annual net income plummeted to $14.4 billion — its smallest profit since 2019 — as the company spent billions to recover from the cyberattack on claims processing subsidiary Change Healthcare and made less from offering Medicare and Medicaid plans, according to financial results released Thursday morning.
Still, when excluding the cyberattack costs (and other factors UnitedHealth believes aren’t representative of its overall business performance in the year), the Minnesota healthcare behemoth reported adjusted profit of $25.7 billion — an all-time record.
Without Change and other factors, UnitedHealth reported record profit last year
UnitedHealth’s unadjusted and adjusted net income, 2014-2024
In a call with investors Thursday morning, executives acknowledged widespread discontent with the U.S. healthcare industry in their first public comments since UnitedHealthcare CEO Brian Thompson was killed in December.
The crime, which appears to have been motivated by anger over health insurers delaying and denying medical care, set off a torrent of anti-insurer sentiment online — and calls from investors for UnitedHealth to reckon with its business practices.
During the call, CEO Andrew Witty argued the firestorm was indicative of larger problems with the healthcare system — not just health insurers — and placed blame on hospitals for overbilling for care and on drugmakers for setting high list prices for medications.
“Fundamentally, healthcare costs more in the U.S. because the price of a single procedure, visit or prescription is higher here than it is in other countries. The core fact is that price, more than utilization, drives system costs higher,” Witty said.
Still, the CEO pledged that UnitedHealth will work this year to improve the speed and accuracy of claims processing, reduce processes that can slow down procedure approvals and better communicate with its members.
“If you look at the mission of the company, it’s all about trying to improve the health system for everybody,” Witty said. “We recognize there’s still a lot of work to be done in that regard.”
Optum Rx pledges 100% rebate pass-through
Criticism of UnitedHealth’s business practices has also hit its pharmacy benefit manager, Optum Rx. The company is one of the so-called “Big Three” PBMs, along with Cigna’s Express Scripts and CVS’ Caremark, which jointly account for about 80% of U.S. prescriptions.
Lawmakers on the Hill have proposed a number of bills targeting how PBMs do business in a bid to lower drug prices. And earlier this week, the Federal Trade Commission — which is suing all three companies — released its latest report on the industry that accuses the Big Three of jacking up the prices of specialty drugs.
Amid Washington’s focus on PBM reform, Optum Rx plans to phase out all models that allow it to retain savings from negotiations with drugmakers over the next three years, Witty said.
The CEO noted that Optum Rx already passes through 98% of rebate discounts, but the remaining fraction it retains gives critics leverage to argue PBMs are profiteering from their middleman status in the drug supply chain.
“We’re committed to fading out those remaining arrangements so that 100% of rebates will go to customers by 2028 at the latest,” Witty said. “This will help make more transparent who is really responsible for drug pricing in this country: the drug companies themselves.”
UnitedHealthcare’s underwhelming results
UnitedHealth has also been dealing with a more quotidian issue with offering health insurance: errors in predicting the cost of medical care its members used last year.
These problems dragged into the fourth quarter, with the company recording a medical loss ratio of 87.6%, well above analyst expectations.
Specifically, the Biden administration’s changes to how health insurers code members’ risk in Medicare Advantage have lowered reimbursement, even as seniors use more medical care than insurers planned.
And in Medicaid, states’ payment rates continued to land below the cost of caring for beneficiaries in the safety-net program in the fourth quarter, CFO John Rex said. Higher hospital coding intensity and specialty medication prescribing also drove up medical costs in the quarter.
The underwhelming results are a bad sign for the rest of the earnings season, which UnitedHealth kicks off each year. Other publicly traded insurers are likely to report similar expense pressures, causing stocks in Humana, CVS, Elevance, Centene and Cigna to dip in premarket trading Thursday.
UnitedHealth’s financial outlook for 2025 projects further increases in medical costs, with an expected MLR of 86.5% at the midpoint, up from the 85.5% lodged this year.
However, executives stressed that UnitedHealthcare plans for 2025 are well-situated to absorb any continuing pressures.
States continue to increase their Medicaid rates. And MA enrollment during the signup period in the fall was strong, Rex said. That includes a tickup in seniors electing for more managed care options like HMOs, plan designs that limit coverage to specific providers, that result in more predictable spending for the insurer, according to the CFO.
“We feel very good about how we priced into [2025]. We feel really, really good about how the mix is coming in terms of that growth. That’s a huge difference from [2024],” Witty said.
UnitedHealthcare expects to add about 800,000 MA members this year.
The insurer closed 2024 with 50.7 million medical members overall.
Final Change bill: $3.1B
In one of the greatest hits to its bottom line last year, UnitedHealth’s Change Healthcare was struck with a ransomware attack in February that breached the data of 100 million people and took its systems offline for months, causing a cascade of billing problems for providers nationwide.
Final cyberattack costs of $3.1 billion in 2024 blew past initial spending estimates. UnitedHealth initially expected $1.6 billion in costs, before revising the outlook to $2.9 billion in October.
The attack also reignited anticompetitive concerns about UnitedHealth’s 2022 acquisition of Change. The $13 billion deal was opposed by regulators in the Department of Justice who argued it would give UnitedHealth access to vast amounts of data from its health insurance rivals and unprecedented market power in the claims management space. Still, a judge allowed the deal to go through.
UnitedHealth reaffirmed its 2025 outlook following the fourth-quarter results, including revenues of $450 billion to $455 billion this year.
