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UnitedHealthcare's Profits: Impact of Pandemic vs. Denials

2024-12-07

The profits of UnitedHealth Group's health insurance business, UnitedHealthcare, witnessed a remarkable surge during the pandemic. However, as the Covid-19 pandemic subsided and medical costs began to rise due to increased care seeking by Americans, this growth has tempered. In the wake of the tragic shooting death of UnitedHealthcare's chief executive, Brian Thompson, a spotlight was shone on health insurer denials of medical care. Critics claim that health insurers' slow-walking of medical treatment approvals and outright denials of procedures and other care have led to greater profits. But it was not long after the coronavirus hit the U.S. in 2020 that health insurance company profits began to soar. With lockdowns, office closures, and limited doctor appointment windows, people were not seeking care, resulting in more money for the insurance companies.

Trends during the Pandemic and Beyond

The U.S. public health emergency played a significant role in keeping record numbers of people covered by Medicaid and offering enhanced subsidies for more Americans to afford individual Obamacare coverage. These trends helped most health insurers achieve record profits. UnitedHealth Group, for instance, reported net income of $22.3 billion last year, with $20.6 billion in 2022, $17.3 billion in 2021, and $15.4 billion in 2020. Before the pandemic, in 2019, it made $13.8 billion.Despite the rising profits, financial reports show that the company is spending more on medical care. In 2020, the full year medical care ratio of 79.1% declined from 82.5% in 2019 due to disrupted care patterns. As the pandemic wore on and more people returned to seeking medical care, this percentage gradually rose. In 2021, it was 82.6%, in 2022 it was 82.0%, and in 2023 it rose to 83.2%. In the fourth quarter of last year, it reached as high as 85%. In 2024, the third quarter medical care ratio was 85.2% compared to 82.3% last year.The higher medical expenses have also affected UnitedHealth's rivals, such as Humana and CVS Health's Aetna. These companies have seen historic spikes in costs, particularly in their Medicare Advantage plans, as seniors are seeking more medical care than in the past. "The sector is navigating significant regulatory changes while also absorbing unprecedented increases in medical cost trends," Humana said in January.UnitedHealth's annual medical costs were $210.8 billion in 2022 and rose to $241.9 billion in 2023 when President Biden ended the U.S. Public Health Emergency in May. In the first nine months of this year, UnitedHealth medical costs were $197 billion and are on track to be even higher than last year.These changes in medical costs and profits highlight the complex dynamics at play in the health insurance industry. As the post-pandemic era unfolds, it will be interesting to see how these trends continue to shape the industry and the financial performance of health insurance companies.

English

Trends during the Pandemic and Beyond