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.
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.