Facing headwinds including higher spending on patient care, UnitedHealth Group executives on Tuesday forecast a conservative growth projection for next year, prompting investors to send the stock lower.

The Minnetonka-based health care giant announced it now expects at most around $30 per share in earnings next year, about half of the expected growth rate, BofA Securities noted in a research report. Yet analysts remain bullish on UnitedHealth Group, given the company's ability to navigate the insurance environment and the expectation it can gain share in the Medicare Advantage market next year.

UnitedHealth Group stock sank more than 8% after third-quarter earnings results were released Tuesday.

Chief Executive Andrew Witty said the outlook was driven by factors that primarily hurt its health insurance business.

A reduction in Medicare funding, previously disclosed, will continue to challenge the company's insurance division, UnitedHealthcare. Witty added that state payment rates received by the company do not match use of medical services by its Medicaid patients.

UnitedHealthcare says it has also seen an uptick in the use of expensive medications across both Medicare and Medicaid. The company is a large vendor to both of the government health insurance programs.

"As a result, we anticipate stepping out for 2025 more conservatively than is typical," Witty said, referring to financial guidance for next year. "We will be prudent in an initial early view."

The CEO's commentary came during an earnings call when UnitedHealth Group executives detailed how medical costs rose during the third quarter. The company's percentage of premium dollars spent on medical care — known as the "medical loss ratio" — came in at 85.2% for the third quarter, a rise from 85.1% during the previous three months and 82.3% during the same period last year.

Hospitals during the third quarter continued what Chief Financial Officer John Rex called "extreme" coding actions, where some medical centers are categorizing patient visits in ways that increase reimbursement. Rex first called out these actions when discussing second quarter results in July.

"Certain entities have been notably and persistently aggressive, having upshifted their coding intensity factors by more than 20 percent," Rex said. "We are actively addressing this unnecessary additional cost burden to the health system."

The company also is having problems with the revenue it receives for running managed care health plans in Medicaid, the state and federal health insurance program for lower-income Americans and people with disabilities.

Over the past year, states have been re-determining eligibility for beneficiaries, a process that's resulted in many healthier enrollees losing coverage. This means the remaining population is using more services on average, UnitedHealthcare says, but payment rates to the company's health plans are still based on the lower utilization of the past.

A final factor, Rex said, is the federal Inflation Reduction Act, which next year is eliminating co-insurance payments from Medicare patients during what's called the "catastrophic phase" of Part D medication benefits. UnitedHealthcare anticipated that this change would increase use of costly drugs next year, Rex said, but the company started seeing the effects during the third quarter.

There was a "rather rapid acceleration in the prescribing of certain high cost specialty medications," Rex said, "primarily those used to treat cardiovascular disease, autoimmune disorders and cancer."

All three factors pushed up the medical loss ratio, a closely watched indicator of cost trends since unexpected increases can eat into health insurer profits. And the effect was focused on the company's Medicare and Medicaid health plans, not commercial coverage purchased by employers, said Brian Thompson, the UnitedHealthcare chief executive.

In considering financial guidance for 2025, Witty said the company's cautious outlook was based in part on a "respectful view of the care activity that [Rex] noted."

"At this distance, we expect the upper end of the likely range we'll offer in December as being around $30 per share," Witty said, below the $31.18 per share expected by analysts.

Across the health insurance industry, rising costs have been cited as a factor in recent premium increases, including jumps for next year in Minnesota's markets for individual and small employer coverage. Controlling hospital and medication costs are top priorities, Witty said.

UnitedHealth Group operates the largest health insurance company in the U.S. as well as the health services business Optum, which runs outpatient medical centers, a pharmacy benefits manager and a unit for health information technology.

At the end of September, UnitedHealthcare had about 49.3 million enrollees in the U.S.

During the third quarter, UnitedHealth Group reported a profit of $6.06 billion on revenue of $100.8 billion, rising 3.6% and 9% respectively over the year-ago period.

Adjusted earnings per share of $7.15 beat analyst estimates by 15 cents.

For 2024, UnitedHealth Group is forecasting adjusted earnings for the year of $27.50 to $27.75 per share, which is the lower half of the previously announced range.

Figures for adjusted earnings exclude one-time factors such as the previously announced divestiture of UnitedHealth Group's health insurance and health care operations in Brazil.

During the third quarter, UnitedHealth Group saw more costs related to a cyberattack earlier this year at the company's Change Healthcare division. The hack forced the company to shut down a widely used system for processing claims, creating financial problems for hospitals and clinics across the country.

The estimate for total financial impact from the cyberattack, before adjusting for tax benefits, is about $2.77 billion — up from an estimate in July of up to $2.45 billion. After adjusting for tax benefits, UnitedHealth Group now estimates a total financial hit from the cyberattack of about $2.24 billion.

Enrollment in Medicare Advantage plans grew slightly during the quarter to 7.8 million people. Open enrollment starts today for Medicare health plans, where UnitedHealthcare is the nation's largest provider and says its plans will reach 96% of eligible Medicare beneficiaries.

UnitedHealth Group this spring said it had global employment of about 400,000 people, including more than 19,000 people in Minnesota.