Shelby Livingston | April 18, 2017
UnitedHealth Group, the nation’s largest health insurer, grew revenue and profit in the first quarter of 2017 after bailing on nearly all of the Affordable Care Act’s health insurance exchanges this year.
Minnetonka, Minn.-based UnitedHealth, the first of the national health insurers to report earnings, beat Wall Street’s profit estimates after two years of bleeding money from plans sold on the ACA’s insurance exchanges.
UnitedHealth lost more than $1 billion on the exchanges in 2015 and 2016. It sold exchange plans in 34 states last year, but remains in just a handful this year.
The company said it served 765,000 fewer people in ACA individual plans during the first quarter after withdrawing from most exchange markets. That membership drop reduced revenue by about $1.6 billion, the company said.
Other national insurers have since followed in UnitedHealth’s footsteps and scaled back their exchange footprints. Aetna this year pulled out of exchange plans in 11 states. And Humana said it will no longer sell health coverage on the exchanges starting next year. Humana had previously pulled the plug on its off-exchange individual plans.
Experts expect other health insurers to exit the exchanges if the Trump administration and Congress don’t lay out a clear regulatory framework that allows insurers to price plans without losing money.
Insurers’ most pressing concerns have yet to be answered—continued funding of the cost-sharing subsidies that help low-income Americans afford coverage, and the enforcement of the mandate requiring most Americans to purchase insurance.
During a conference call Tuesday with investors, UnitedHealth CEO Stephen Hemsley also urged congressional leaders to permanently repeal the health insurance tax “before it further worsens consumers premiums, state budgets and senior benefits.”
Repealing the Obama administration’s tax on health insurers, which was suspended for 2017 and will be reinstated for 2018, would boost health insurers’ profits.
Even with lower individual membership, UnitedHealth reported $48.7 billion in total revenue in the three months ended March 31, up 9.4% over the same time last year.
Premium growth and membership gains in Medicare Advantage and Medicaid, as well as strong earnings in the company’s health services business, Optum, drove UnitedHealth’s higher revenue.
UnitedHealth grew Medicare Advantage membership by 775,000 over the same time last year. And Medicaid membership increased by 750,000 members year over year.
Total medical membership reached 49.3 million people, up 3.5% from the same time a year ago.
As a result, UnitedHealth’s primary insurance business, UnitedHealthcare, grew revenue by 11.8% year over year to $40.1 billion.
Optum, UnitedHealth’s fastest-growing segment that has also become a major driver of earnings, reported revenue of $21.2 billion, up by 7.9% over the same time last year.
All three of Optum’s segments posted double-digit revenue growth. Optum works with hospitals, doctors, other insurers and employers on almost every facet of healthcare, ranging from drug pricing and administrative services to data analytics and population health.
UnitedHealth’s combined medical-care ratio for the first quarter was 82.4%, up by 0.7 percentage points over the same time last year, because of the 2017 health insurance tax deferral, which reduced members’ premiums, and was offset by fewer individual ACA members.
Net income totaled $2.2 billion, up 34.7% over the same period last year.
Source: Modern Healthcare