UnitedHealth Raises Forecast as Profit Beats Estimates

UnitedHealth Group Inc., the biggest U.S. health insurer by sales, raised its profit forecast after quarterly earnings beat analyst estimates as more people signed up for Medicaid services under Obamacare.

Profit for the year is now expected to be $5.60 to $5.65 a share, the Minnetonka, Minnesota-based company said today in a statement. The company’s previous forecast was for $5.50 to $5.60. Third-quarter earnings were $1.63 a share, topping by 10 cents the average estimate of 23 analysts surveyed by Bloomberg.

UnitedHealth’s results were helped by more people signing up for Medicaid under the Patient Protection and Affordable Care Act, which expanded the program for poor Americans. The company added 250,000 people to its Medicaid services business in the quarter, and has gained a total of 885,000 customers under the program through the first nine months of the year.

“Medicaid is a huge driver of growth,” said Ana Gupte, an analyst at Leerink Partners LLC, in a telephone interview. “They’re bringing more uninsured people. United is a leading Medicare service provider and clearly benefiting from the tailwind.”

U.S. health insurers have been adapting to the 2010 law that this year required all Americans to buy insurance, giving those with low incomes subsidies to help them do so. In return, insurers have to cover more preventive care services, agree not to turn away people with preexisting conditions and limit what patients pay out of pocket.

Shares Rise

UnitedHealth shares rose 3.9 percent to $85.39 at 4 p.m. in New York, and the Standard & Poor’s 500 Managed Health Care Index rose 1.9 percent. The index of U.S. health insurers has gained 13 percent this year.

UnitedHealth’s net income for the third quarter rose to $1.6 billion from $1.57 billion a year earlier, the company said.

Revenue rose 7 percent to $32.8 billion, led by the company’s public and senior business, with revenue from its community and state plans jumping 34 percent to $6.13 billion. UnitedHealth saw a decrease in revenue from its U.S. commercial division, which provides coverage to individuals and employers, after losing 30,000 customers on employer-sponsored plans.

UnitedHealth is the first of the major U.S. health insurers to report third-quarter results.

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