(Story updated at 3:02 p.m. ET)
Third-quarter profit shot up at UnitedHealth Group, just as the health insurance and services conglomerate is set to drastically reduce its presence in the Affordable Care Act's individual marketplaces.
UnitedHealth executives raised net earnings projections for the year to $7.45 because of the third-quarter boost. Net earnings went up 23% annually, totaling $1.97 billion in the three-month period that ended Sept. 30. Year-over-year revenue increased almost 12% to $46.3 billion as UnitedHealth recorded heavy growth in its Medicare, Medicaid, employer and consulting lines of business.
Open enrollment for 2017 begins Nov. 1, and UnitedHealth CEO Stephen Hemsley said the company will only stay in a handful of ACA exchanges after losing approximately $1.3 billion over the past two years. UnitedHealth had about 980,000 members in ACA-compliant individual plans at the end of the quarter—770,000 on-exchange plans and 210,000 off-exchange. That membership will decline significantly after 2017 begins and UnitedHealth customers are forced to switch to other plans.
UnitedHealth's ACA business lost $200 million in the third quarter, but $120 million of that total was offset earlier this year, which meant the company only absorbed $80 million of ACA losses in the quarter. Executives maintained that UnitedHealth was winding down its ACA footprint.
“Nothing's really changed on the ACA front, and that's a good thing,” said Dan Schumacher, chief financial officer of UnitedHealthcare, the subsidiary that provides health benefits.
UnitedHealth had 48.1 million members with full medical coverage as of Sept. 30. The Minnetonka, Minn.-based company was able to raise profit partially by keeping the costs of those members down. UnitedHealth's medical-loss ratio, which shows how much of the insurance premiums are spent on healthcare, was 80.3% in the third quarter of this year, down from the 80.9% ratio recorded in the same period last year.
UnitedHealth's Optum subsidiaries continued to anchor overall profits as well, posting a 6.9% operating margin in the quarter. UnitedHealthcare had a 5.7% operating margin in the quarter.
Optum sells consulting, data analytics and care management to all corners of the healthcare industry. OptumRx, UnitedHealth's pharmacy benefit manager, is the largest component by revenue. OptumRx has won several major employer contracts recently due in large part to its proprietary ability to crunch drug-spending data, OptumRx CEO Mark Thierer said in a recent interview with Modern Healthcare.
UnitedHealth's stock price was trading about 7% higher throughout Tuesday, hovering around $143 per share.