UnitedHealth to expand exchange presence as profits dip

UnitedHealth Group, the nation's largest insurer, plans to expand its presence in the state and federal exchange marketplaces in 2015.

“We had a very modest footprint in 2014,” said Gail Boudreaux, executive vice president of UnitedHealth Group, on a call with investors Thursday morning to discuss first-quarter financial results. “We do have a bias to increase that participation in 2015. … The size of the overall market is positive.”

The company took a more cautious approach to the first year of the healthcare reform law's new marketplaces than some of its competitors, particularly WellPoint.

UnitedHealth Group's first-quarter financial results were largely on target with analysts' expectations, but profits dropped significantly from 2013. The company reported earnings of $1.1 billion for the first three months of this year, down 7.8% from the comparable period in 2013. The company reported earnings per share of $1.10, down from $1.16 in the first quarter of 2013.

The Minnetonka, Minn.-based firm had revenue of $31.7 billion for the first three months of 2014. That was up 4.6% over the comparable period in 2013. It was also $600 million above revenue for the fourth quarter of last year.

UnitedHealth Group blamed its tepid results on fees from the Patient Protection and Affordable Care Act, financial pressures on the Medicare Advantage program and the Medicare hit from the across-the-board federal spending cuts known as sequestration. The company estimated that those headwinds cost the insurer 35 cents per share.

In addition, the company is concerned about the higher-than-anticipated cost of customers with hepatitis C. In December, the Food and Drug Administration approved the drug Sovaldi, which is highly effective in combating liver disease, but costs $84,000 for a 12-week course of treatment.

The company's health benefits division, UnitedHealthcare, reported revenue of $29.3 billion for the first quarter, up $1 billion over the comparable period in 2013. The division had 44.7 million customers in the first quarter of the year, up from 42 million in the prior year. Enrollment growth was significant in the commercial and Medicaid sectors, climbing 6.6% and 10.1% respectively. Enrollment in Medicare Advantage also increased over the first quarter of last year, by 4.2%, but was down slightly from the end of 2013.

“Significant ACA and sequestration funding cuts for seniors using Medicare Advantage products resulted in the company exiting markets, reducing product offerings, adjusting networks and reducing benefits for 2014,” United noted in its earnings report. “Despite these actions, first quarter 2014 senior participation was basically stable with year-end 2013, with just under 3 million seniors served.”

UnitedHealth Group's Optum unit continued to experience rapid growth. Revenue for the first quarter was $11.2 billion, up 29% over the first quarter of 2013. The health-services division gained a higher profile with its key role in helping to fix the HealthCare.gov exchange website after its problem-plagued rollout.

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