UnitedHealth Puts Obamacare in Rearview as Business ExpandsBy
Republicans in Senate give up on latest Obamacare repeal bill
Adjusted earnings of $2.46 a share beat estimates of $2.38
UnitedHealth Group Inc. is putting its Obamacare struggles behind it just as Republicans in the Senate are trying to do the same.
The biggest U.S. health insurer reported second-quarter results Tuesday showing expanded membership as it moved away from the Affordable Care Act and added customers mainly in the government funded programs for the elderly and poor: Medicare and Medicaid. The company largely quit Obamacare going into this year, after racking up losses selling policies to individuals last year.
UnitedHealth’s Medicare and retirement unit, which sells private health plans to seniors, increased revenue by 17 percent to $16.7 billion, and added 935,000 people, the company said in a statement. Its employer and individual unit revenue declined 4 percent, after the insurer’s pullback from Obamacare. UnitedHealth had 540,000 customers in the individual market, down from 1.5 million a year earlier.
Earnings for the quarter, excluding some items, were $2.46 a share, rising from a year ago and beating analysts’ estimates. The company boosted its full-year adjusted earnings guidance to $9.75 to $9.90 per share, from $9.65 to $9.85 a share.
UnitedHealth shares fell 1.1 percent to $184.35 at 10:03 a.m. in New York.
Sheryl Skolnick, an analyst with Mizuho Securities, said the company’s ability to control medical expenses was the brightest spot in a strong quarter. Insurers measure costs with what’s called a medical loss ratio, or MLR. In the second quarter, UnitedHealth spent 82.2 cents of every dollar in premium revenue on care.
“That the MLR has been well-controlled recently, especially since the exit from the exchanges, and that this is not just a one-time event, makes us even more comfortable that the driver is the culmination of many factors,” Skolnick said. “The fact that UNH is years ahead of peers suggests that this could be a meaningful competitive and valuation advantage.” She has a buy rating on the stock.
Most for-profit insurers have scaled back from the chaotic Obamacare markets, and instead are targeting steadier business such as Medicare Advantage. The program is still government-funded but isn’t in the political crosshairs of Republicans who want to repeal the Affordable Care Act.
The strategy of shrinking away from Obamacare was further ratified late Monday, as the GOP’s latest efforts to repeal and replace parts of the health law was dealt yet another defeat, likely ensuring continued uncertainty in the markets. Two additional senators announced their opposition, dooming the bill.