UnitedHealth says hack will cost it $1.6bn in 2024

UnitedHealth Group said on Tuesday it expected the hack of its Change Healthcare unit to cost the company up to $1.6bn this year but maintained its 2024 earnings forecast, suggesting a less severe impact of the cyberattack than many on Wall Street had feared.

Despite the huge disruptions, the healthcare conglomerate beat estimates for first-quarter earnings, and its shares were up 7.5% at $478.98 in morning trading. United shares have fallen nearly 15% since it disclosed the ransomware attack on February 21.

The hack at Change, which operates one of the largest financial clearing houses in the US, disrupted payments to doctors and healthcare facilities nationwide for a month while taking a harsh toll on community health centres that serve more than 30-million poor and uninsured patients.

The health insurer relaxed, or removed, prior authorisation processes for some claims after the hack, stoking concerns of an increase in medical costs. Executives said on Tuesday these had recently been reinstated.

There were also delays in claim submissions as medical care providers, unable to access the Change system, struggled with paperwork.

“We’ve made substantial progress and we will not rest until care providers’ connectivity needs are met,” UnitedHealth CEO Andrew Witty said on a conference call to discuss results.

The company said it had already booked $872m in costs related to the data breach in the quarter, most of it as one-time items.

Still, UnitedHealth backed its 2024 adjusted profit forecast of $27.50 to $28 per share. Disruptions from the hack are expected to impact profit by $1.15 to $1.35 per share this year, the company said.

“The impact of the hack is not severe as expected, especially seeing that they maintained their adjusted earnings outlook for the year despite the business disruption,” said Gerrit Smit, head of global equity management at investment firm Stonehage Fleming, which held more than 90,000 UnitedHealth shares as of the end of 2023.

Morningstar analyst Julie Utterback said demand for medical care trends were in line with management’s expectations, which should be a relief to industry investors who have been concerned about those elevated costs.

UnitedHealth reported a rise in medical care ratio — the percentage of premiums spent on medical care — to 84.3% from 82.2% a year earlier.

Shares of rival health insurers Elevance, CVS Health, Cigna, Centene and Humana were up between 2% and 5.5% in premarket trading.

UnitedHealth has yet to disclose the amount of personal data that was breached in the hack. It must report that information within 60 days as required by federal law.

For the quarter, UnitedHealth reported a profit of $7.16 per share, excluding a hit of 25c from business disruptions caused by the data breach, compared with the analysts' estimates of $6.61 per share, according to LSEG.

The company recorded a net loss of $1.53 per share due also to a $7bn charge related to the sale of its Brazil unit, Amil.

Reuters