Enrollment Jump Helps UnitedHealth Group Profits Soar 31 Percent
Health insurer UnitedHealth Group reported a second quarter profit jump of 31 percent as enrollment in the insurer's plans went up, The Associated Press/The New York Times reports. "The company's total enrollment grew about 1 percent, to 32.5 million compared with last year, with gains in Medicare and Medicaid businesses offsetting commercial health insurance losses." The company's commercial enrollment fell 440,000 as the sector deals with job cuts and the recession (7/20).
The Wall Street Journal: The managed-care company reported a $1.12 billion profit - 99 cents a share - up from $859 million - 73 cents a share - in the year before. "Key to UnitedHealth's strong quarter was its medical-loss ratio, or the amount of premiums used to pay patient medical costs versus administrative expenses and profits. That metric fell to 81.5% from 83.6% year over year, reflecting lower medical costs from a weaker flu season and fewer visits to doctors and hospitals. Insurers set prices to cover anticipated medical spending plus profit and overhead, and when medical costs come in under those estimates, the insurer collects a larger return." In the health overhaul, starting next year, insurers must spend 80 percent of premiums from small business and individual insurance on care - its medical-loss ratio. That figure is 85 percent for large business plans.
Such performances by UnitedHealth and its peers "will make it harder for the health insurers to win regulatory approval for premium rate increases, predicted Citigroup analyst Carl McDonald. The health overhaul lets the Department of Health and Human Services seek justification for 'unreasonable' rate increases, and members of Congress are pursuing more teeth for federal regulators to veto insurers' rate requests" (Johnson and Wisenberg Bring, 7/20).
Reuters/Hartford Courant: Analysts had expected revenue from the company to come in at $22.97 billion, but it came in 7.4 percent higher at $23.26 billion. "UnitedHealth, with 4,000 employees in Connecticut - including 2,100 in downtown Hartford - kicked off what is expected to be a strong earnings reporting season for health insurers. But Wall Street enthusiasm for the industry is expected to be tempered as investors question whether its performance will be sustainable under the new U.S. health care reform law" (7/20).
The (Minneapolis-St. Paul, Minn.) Star-Tribune: "Yet, in a sign of the topsy-turvy world insurers are living in right now, the company's stock fell more than 1 percent before recovering and closing Tuesday pretty much flat at $30.83. Some investors worry that the fatter insurance profits, the bigger a target they'll be for regulators. 'While people are justifiably focused on health reform, that is only one element of the market dynamic,' Hemsley said" (Yee, 7/20).