UnitedHealth Profit Rises Despite ACA-Related Costs -- 2nd Update
18 October 2017 - 3:32AM
Dow Jones News
By Allison Prang and Anna Wilde Mathews
UnitedHealth Group Inc.'s core insurance and health-services
businesses grew in its latest quarter, despite a dent in revenue
caused by the company's decision to pull out of most Affordable
Care Act markets.
The latest quarterly results from the nation's largest health
insurer come as the market is facing policy changes related to the
ACA. President Donald Trump last week signed an executive order
seeking to provide lower-cost plans in the individual insurance
market, and he is poised to end payments to insurers that offset
subsidies to low-income consumers.
Guiding the company through the shifting landscape is David
Wichmann, the former UnitedHealth president who took the reins as
chief executive Sept. 1. Former CEO Stephen Hemsley now serves as
executive chairman.
During a call with analysts, Mr. Wichmann said UnitedHealth has
"a great deal of experience in the areas covered" in the
president's executive order, which are short-term health policies,
association plans and health-reimbursement arrangements.
UnitedHealth said it has around 300,000 people currently enrolled
in association plans and the "performance is strong." The insurer
also said it was seeing an "incredible increase in the growth" of
short-term plans before the Obama administration capped their
duration at three months, and the company would be "excited" to see
the Trump administration expand the length again, as the executive
order suggested.
Mr. Wichmann also said he expects "any impact to be extremely
small" related to the Trump administration's move to end the
cost-sharing reduction payments to insurers.
UnitedHealth also said Tuesday it expects 2017 earnings on an
adjusted per-share basis to "approach" $10, up from its prior
forecast of $9.75 to $9.90.
For 2018, Mr. Wichmann said that earnings could be affected by
an ACA tax on health plans that is slated to return next year after
being suspended. If the tax isn't reinstated, Mr. Wichmann said
UnitedHealth earnings next year will likely grow in the 13%-to-16%
range. If the tax does return next year, the impact on
earnings-per-share growth would be roughly 75 cents, the company
said. Overall, the CEO said that UnitedHealth expects adjusted
per-share earnings for next year "within a typically sized range,
with the top side of that range" in line with analysts' current
consensus estimates.
Shares were up 4.9% in late-morning trading at $202.57, on
course to set a new high. They are up 21% year to date.
UnitedHealth has grown in recent months after it bought Surgical
Care Affiliates Inc. and confirmed last month it was exploring the
purchase of Banmedica, a health-care company in Chile, in what
analysts estimate could be a $2.8 billion deal.
The Advisory Board Co. recently announced it was selling its
health care business to Optum, UnitedHealth's health-services
business, in a deal that is expected to close at the end of this
year or early next year.
Revenue from the Optum business increased 8.4% to $22.9 billion
in the latest quarter, compared with $21.1 billion in the same
period last year. The division's operating margin expanded to 7.4%,
from 6.9% a year ago. Revenue at OptumRx, the division's
prescription business, increased 4.7% to $16 billion. Expansion in
delivery of care drove a 21% increase in revenue from the
division's OptumHealth business, to $5.3 billion.
Revenue from the UnitedHealthcare insurance business grew 9.6%
from a year earlier to $40.7 billion, driven by increased
enrollment in employer-sponsored plans, as well as Medicare,
Medicaid and international programs.
Overall, UnitedHealth reported adjusted net earnings of $2.6
billion, or $2.66 per share, compared with $2.1 billion this time
last year. Analysts were predicting $2.56 per share.
Revenue rose 8.7% to $50.3 billion, but consolidated revenue
took a $1.6 billion-dollar hit from ACA-related factors, including
the withdrawal from markets and a health-insurance tax
deferral.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
October 17, 2017 12:17 ET (16:17 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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