UnitedHealth reports lower first-quarter profit, higher costs

UnitedHealth Group Inc., the nation’s largest health insurer, said its first-quarter profit dropped 14% as medical costs climbed higher.

The Minnetonka, Minn., company said its health plan membership increased 18% in the quarter to 42 million people, boosted by international growth.

But UnitedHealth’s biggest expense, medical costs, shot up 13% in the quarter to $22.6 billion. Analysts expressed some surprise at the increase in medical costs since some hospital chains and other medical providers have reported weaker patient volume.

The company also said that federal budget cuts from the sequestration may squeeze financial results for the year.

Shares of UnitedHealth were off $2, or 3.2%, to $60.03 in Thursday trading.

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The company said net income for the quarter ending March 31 was $1.2 billion, or $1.16 a share, compared with $1.4 billion, or $1.31 a share, a year earlier.

The results a year ago were aided by a $530-million gain from insurance reserves compared with a similar $280-million increase in the most recent quarter. Revenue in the quarter increased 11% to $30.3 billion.

“This quarter provided a solid start to 2013 across our diversified healthcare businesses,” said Stephen Hemsley, the company’s chief executive.

UnitedHealth is the first major health insurer to report first-quarter results, and it often sets the tone for the industry.

WellPoint Inc., which runs Anthem Blue Cross in California and 13 other Blue Cross plans, reports earnings next week.

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