Widespread decisions to delay nonemergency medical care amid the Covid-19 pandemic helped lift UnitedHealth Group’s profits in the latest quarter.
Photo: callaghan o'hare/ReutersHealth insurers are emerging as clear business winners in the pandemic. That might be less temporary than the market expects.
UnitedHealth Group UNH -2.32% reported second-quarter results on Wednesday that blew past very high expectations. Widespread decisions to delay nonemergency medical care gave the bottom line a major boost: The insurance giant spent 70 cents of every premium dollar on medical care in the quarter, down from more than 83 cents in the second quarter of 2019. As a result, adjusted earnings were $7.12 a share, which was nearly double the total of the year-ago period. This came as revenue grew by just 2% to $62.1 billion.
Shares were little changed in early trading, probably because UnitedHealth didn’t raise its full-year profit guidance. After all, it would seem logical that patients who skipped needed care will eventually catch up. The company said that access to care began to improve in May and is approaching normal levels. What’s more, it is inevitable that some patients who have deferred care will have gotten sicker during the pandemic, which could result in more-expensive bills going forward.
But the stock has been a big winner since the spring, and more upside seems within reach. For starters, UnitedHealth earned $10.84 a share in the first half of the year. That is two-thirds of the full-year profit outlook of about $16.40 a share. Last year, the company earned more than $7 a share over the final six months. UnitedHealth has earned a reputation over the years for issuing conservative guidance and beating it.
There is reason to expect a similar result this time beyond recent history. Despite significant pent-up demand for care, it will take time for patients to catch up. Hospitals and walk-in surgical centers can increase capacity by only so much under the best conditions, and Covid-19 cases are again surging in large parts of the U.S. Another wholesale shutdown of normal hospital operations seems remote, but the presence of hot spots means procedure volume recovery won’t necessarily be smooth.
The looming presidential election could be another reason the company doesn’t want to toot its own horn too loudly at the moment. The cost of health care has been largely absent from the debate, but that could change. Flat guidance today could help ensure a profitable future.
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