UnitedHealth Group increases revenue as it exits some state health exchanges
UnitedHealth Group boosted revenue in the first quarter, despite losses from participation in Affordable Care Act exchanges that are leading the company to exit those marketplaces in at least five states.
The nation's largest insurer said Tuesday that its first quarter revenue rose 25%, to $44.5 billion as compared to that three month period in 2015. Adjusted earnings jumped 17% to $1.81 per share, versus the first quarter of 2015, beating analysts estimates by nine cents, according to Zacks Research.
The company saw particularly strong results with its health service business Optum, which consults with industry players on how to cut costs and better the quality of care. It saw $19.7 billion in revenue during the first quarter as compared to $12.8 billion during that quarter last year.
But UnitedHealth Group hasn't fared so well in the exchanges created in many states by the Affordable Care Act. In an earnings call with investors Tuesday, UnitedHealth Group's CEO Stephen Hemsley said that the smaller market size, and the higher risks in the short term of those exchanges are limiting the company's ability to continue providing services. While the company services 795,000 people through public marketplaces as of March, that number is expected to drop to 650,000 by December.
"Next year we will remain in only a handful of states,'' Hemsley said, adding that the company doesn't plan to have financial exposure to any exchanges in 2017.
As it sheds those exchanges, UnitedHealth Group says it expects $182 billion in revenue this year, and earnings when adjusted of $7.75 to $7.95 per share.
The market appeared to be responding favorably to the results, with UnitedHealth's shares (UNH) up 1.5% to $129.77 per share in afternoon trading.
While many Obamacare critics cite UnitedHealth's decision to pull out of several exchanges as a sign the law is in trouble, the Kaiser Family Foundation released an analysis Monday showing that a mass withdrawal by the company would have a big effect on competition, but it wouldn’t have much of an impact on the average benchmark premium nationally. This premium is used to calculate the subsidies that more than 80% of people who buy on the exchanges get.
The new analysis showed 53% of U.S. counties would have just one or two exchange insurers if United were to leave all the exchanges, which are also known as marketplaces. Three insurers are considered necessary to ensure adequate competition.
Department of Health and Human Services spokesman Benjamin Wakana also downplayed the significance of UnitedHealth’s decisions, noting that the number of issuers per state has grown year-over-year.
"We have full confidence, based on data, that the Marketplaces will continue to thrive for years ahead,” Wakana said in a statement. “The Marketplace should be judged by the choices it offers consumers, not the decisions of any one issuer.”
Contributing: Jayne O'Donnell