UnitedHealth Sees Strong Growth Despite Exits From ACA Markets
July 18 2017 - 10:36AM
Dow Jones News
By Justina Vasquez
UnitedHealth Group Inc. reported profit growth in the second
quarter, as the company works to recoup revenue lost from efforts
to exit from Affordable Care Act markets.
The plan to stop selling plans in ACA marketplaces also reduced
pressure on UnitedHealth's earnings, as the company's net margin
rose to 4.6% from 3.8% a year earlier.
UnitedHealth also on Tuesday raised its adjusted
earnings-per-share guidance for the year to between $9.75 and
$9.90, from between $9.65 and $9.85 previously.
Some analysts had projected a margin expansion would be due to
UnitedHealth's and other health insurance providers' firm pricing
power in the Medicare business. They also attributed the growth to
the exemption from ACA taxes that health insurers like UnitedHealth
were granted this calendar year. Credit Suisse analysts said that
while the Medicaid market for individuals is still volatile amid
Washington's health-care overhaul talks, UnitedHealth will likely
have nearly minimized its exposure to that uncertainty by 2018.
Revenue rose 7.7% to $50.05 billion, slowed by withdrawals from
ACA individual markets, combined with the ACA health insurance tax
deferral. Revenue from the Medicare business rose 17% to $16.7
billion.
Analysts surveyed by Thomson Reuters had expected $50.06 billion
in revenue.
U.S. senators have pivoted their plans to overhaul the ACA, and
are no longer seeking approval of a new health-care bill in the
short term. Monday night, two more senators said they would oppose
the GOP-backed measure, leaving the bill just shy of the necessary
votes to pass it. This came after the Republican-led Senate said
Saturday it would delay a vote on the bill previously scheduled for
this week due to the unexpected absence of Sen. John McCain, a
Republican from Arizona, and the opposition of two other Republican
senators. Passage of the law would have eventually eliminated all
of the ACA markets UnitedHealth has been withdrawing from.
The Optum unit, UnitedHealth's health-services arm, saw earnings
from operations grow 21% to $1.5 billion. OptumRx, the company's
pharmacy-benefits manager, saw revenue growth of 5.1% to $15.8
billion.
The insurer's medical-loss ratio -- the percentage of premiums
paid in claims -- increased as the health-insurance tax deferral
was offset by an improved business mix, product performance and
favorable reserve development. It rose to 20 basis points year over
year to 82.2%.
The Minnetonka, Minn.-based company recorded a profit of $2.28
billion, or $2.46 a share, compared with $1.75 billion, or $1.81
per share, a year ago. Excluding certain items, UnitedHealth earned
$2.32 a share, compared with $1.96 a year ago. Analysts had
anticipated the company reporting a profit of $2.23 a share.
Shares in UnitedHealth, up 31% from a year ago, fell 1.5% to
$184.83 in morning trading.
Write to Justina Vasquez at justina.vasquez@wsj.com
(END) Dow Jones Newswires
July 18, 2017 10:21 ET (14:21 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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