For the fourth quarter, United earned $2.5 billion on revenue of $31.1 billion. The profits were up 20% from the same quarter last year.
Those figures were slightly ahead of analysts' predictions for the fourth quarter. But investors reacted warily, with the company's stock dropping modestly in the hours after the results were announced.
United is the largest insurance company in the country in terms of beneficiaries. The company provided healthcare coverage for 45 million people at the close of 2013, an increase of 4.5 million over the previous year.
The growth was led by an increase of 3.2 million individuals in its commercial business. But United also saw significant growth in government programs in 2013. The company added 425,000 individuals to its Medicare Advantage rolls, a 17% increase over 2012. Its Medicaid business added 205,000 customers last year, bringing total enrollment to 4 million.
United officials highlighted the financial success of technology subsidiary Optum. The firm's revenues grew to $10.2 billion in 2013, an increase of more than 25% over 2012. Earnings by the unit reached $655 million, a bump of more than 40%. HHS tapped Optum's QSSI division to lead the rescue effort after the troubled launch of HealthCare.gov, and QSSI recently was asked to continue playing a leading role in improving the functionality of the federal portal for enrollment in new plans established under the Patient Protection and Affordable Care Act.
United officials expressed optimism about 2014. They projected total revenues of $128 to $129 billion for this year and earnings of $5.40 to $5.60 per share. But they also expressed concerns about financial headwinds from the reform law. In particular, cuts to the Medicare Advantage program that were part of the federal healthcare reform law continue to cause concern.
“There's just a ton of pressure all over the system,” Jack Larsen, CEO of UnitedHealthcare Medicare & Retirement, said on the earnings call. “That rate pricing pressure is probably most acute in Medicare.”
That concern is shared by analysts. In a research note, Citi Investment Research's Carl McDonald pointed out that Medicare Advantage rates for 2015 are now expected to be reduced by 5%. “The industry is lobbying to mitigate those cuts, but it would be useful to understand the 2015 impact if the cuts are implemented as proposed,” McDonald warned investors.
UnitedHealth Group has taken a cautious approach towards the state and federal exchanges. The strategy has buffered the company from the turbulent rollout of the online marketplaces. But it also means that the company is passing up the opportunity to compete for many new customers who will be purchasing coverage for the first time, often with the help of significant federal subsidies.
Gail Boudreaux, CEO of UnitedHealthcare, said the company hasn't decided whether it will compete more aggressively in the exchanges in 2015. Companies are expected to submit rates for next year by the end of April.
“At this stage, we're really not projecting our participation,” Boudreaux said. “We will be looking at how robust the enrollment is.”
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