UnitedHealth also gave added insight into its exchange strategy for 2015. The insurer said it will be part of 24 state marketplaces, established under the Patient Protection and Affordable Care Act. That will be 19 more than its current participation.
Vishnu Lekraj, an insurance industry analyst with Morningstar, said UnitedHealth “outperformed peers in the quarter, as it usually does.” UnitedHealth is considered to be the bellwether for all insurers, but the types of members and the types of products at each company has varied greatly, making it difficult to say every insurer will have the same type of quarter.
At the very least, all eyes will be on the other managed-care companies to give similar glimpses into their exchange plans, as some did in the second quarter this year, and elaborate on how their members utilized healthcare services.
“What is going to be their plan or strategy moving forward?” Lekraj asked.
Other provisions of the ACA, aside from the growing member base due to exchanges, are expected to appear in third-quarter results, said Ana Gupte, an analyst at Leerink Partners. She said Medicaid expansion populations are growing quickly, as more states increase Medicaid eligibility to 138% of the federal poverty line. A May report from Standard & Poor's mused that Medicaid expansion health plans were likely to be money losers initially, but Gupte said early returns indicate profit margins on those plans are “better-than-expected.” Companies heavily involved with Medicaid include Centene Corp., Molina Healthcare and WellCare Health Plans.
Gupte also said the healthcare law's three Rs for insurers—risk corridors, reinsurance and risk adjustment—will likely be bigger factors since the accounting for those government subsidies is “more skewed toward the second half of the year.” Each of those programs, which are politically charged, helps insurers offset the financial risks and potentially high medical claims from people who first enrolled in the ACA's individual plans.
All that said, commercial business will remain a key indicator since private, employer-sponsored health insurance still makes up a majority of coverage in the country. Gupte said investors will be closely scrutinizing figures at Aetna, which she called a “poster child for commercial margins.” Aetna's income rose 2.4% year over year in the second quarter.
Aetna and Centene both released earnings early Tuesday, and they backed up analyst predictions. Aetna's third-quarter profit rose 15% as the company's Medicare and commercial markets both expanded heavily. Aetna's medical-benefit costs for government beneficiaries were also lower year-over-year. Centene's net income soared 67%. The company grew much faster than expected with membership growing 42% in the third quarter compared to the same period last year, mostly in the Medicaid space.
WellPoint and Universal American Corp. post earnings Wednesday; and Cigna Corp. and Molina release results Thursday. Health Net, WellCare and Humana share third-quarter earnings on Nov. 3, Nov. 5 and Nov. 7, respectively.
Follow Bob Herman on Twitter: @MHbherman