(Bloomberg) -- UnitedHealth Group Inc. forecast membership in its important Medicare segment that missed Wall Street estimates, a sign of slowing growth in a business that has powered insurers’ earnings for years.
Enrollment in the company’s Medicare Advantage plans, private versions of the US health program for seniors, will be less than 8.1 million next year, UnitedHealth said Wednesday in materials posted on its website. Analysts surveyed by Bloomberg had projected almost 8.4 million on average.
The shares fell as much as 2.2% at the New York market open, the most intraday in almost three months, while rival Humana Inc. lost as much as 3.2% and Elevance Health Inc. shed as much as 1.4%.
While sales of Medicare Advantage plans have been an important source of growth and profits for insurers, concerns about the cost to US taxpayers have prompted changes that may make it less lucrative. Enrollment in the plans at UnitedHealth, the biggest US provider, is expected to grow by about half a million members next year.
The annual 2024 growth rate amounts to about 5%, down from about 11% growth this year to date, according to a research note from TD Cowen analyst Gary Taylor.
“This appears to be a disappointment,” he wrote, noting that the company had expected its membership to increase faster than the overall market.
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Chief Executive Office Andrew Witty acknowledged obstacles from Medicare rate changes that will phase in over the next three years, saying it made the company “double down on eliminating waste” and needless care.
UnitedHealth also predicted 2024 medical costs above analysts’ expectations. Its medical-loss ratio — the portion of premium revenue spent on care — will be between 83.5% and 84.5%, less favorable than analysts’ average estimate of 83%.
UnitedHealth released the outlook ahead of an investor conference Wednesday in New York. Late Tuesday the company gave high-level 2024 financial guidance that was broadly in-line with analysts’ expectations. The company also forecast more revenue from plans that manage Medicaid — the US health plan for the poor — and lower administrative costs than Wall Street anticipated.
--With assistance from Angel Adegbesan.
(Updates with analyst comments, more forecast details from fifth paragraph)
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Author: John Tozzi