Health insurance company profits are once again under the microscope, just as the financial outlook for top insurers is improving.
... as their fortunes boast
WellPoint, UnitedHealth net combined $8.5 billion
Major publicly traded insurers reported record year-end earnings for 2009 in recent weeks, showing a rebound in profits since 2008. And the outlook for 2010 is strong.
The two biggest insurers, WellPoint and UnitedHealth Group, posted revenue of $65 billion and $87 billion last year, respectively. WellPoint had net income of $4.7 billion while UnitedHealth had net income of $3.8 billion in 2009.
UnitedHealth earned close to $1 billion more last year than in 2008, while WellPoint income almost doubled from $2.4 billion in 2008. WellPoint sold NextRx to Express Scripts on Dec. 1, 2009, netting $3.8 billion in the fourth-quarter, boosting earnings dramatically.
At the same time, both insurers lost members year-over-year. WellPoint's medical membership fell by nearly 4% to 33.7 million members in 2009. UnitedHealth Group had 32 million medical members at year-end, down from nearly 33 million in 2008.
Advocates for healthcare reform criticized top insurers for boosting profits while losing members in a report released last week. “What the big insurance companies do to please Wall Street denies affordable health insurance to millions more Americans every year,” said Richard Kirsch, national campaign manager for Health Care for America Now, on a call with reporters.
While top publicly traded health insurers are losing commercial members, they are gaining members in government-sponsored plans such as Medicaid and Medicare, Health Care for America Now pointed out in the report.
Starting this year, UnitedHealth will for the first time generate more of its healthcare services revenue from government business than from employer-sponsored plans, said Carl McDonald, senior analyst at Oppenheimer & Co., in an investor note. This change is a “reflection of the difficult commercial environment, UnitedHealth's merger and acquisition strategy and the significant organic growth in the government products,” he wrote.
The five biggest publicly traded insurers—Aetna, Cigna Corp., Humana, UnitedHealth and WellPoint—earned a combined $12.2 billion last year, an increase of 56%, or $4.4 billion, over the prior year. The companies produced operating margins on average of 5% last year, up from about 3% the year before.
The trade group for insurers, America's Health Insurance Plans, attributes rising premiums to the higher cost of care delivery. AHIP added that “plan administrative costs are rising at far lower rates than the cost of care,” in a written statement.
On year-end earnings calls, executives at the major insurers projected a better 2010 than 2009. “We are off to a good start in 2010,” said Angela Braly, president and CEO of WellPoint.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.