Health care insurer UnitedHealth Group (UNH) is finding profitable pastures after retreating from the Affordable Care Act’s insurance exchanges.
The company’s second-quarter earnings jumped 30 percent, pushed in part by growth in the company’s Optum business, and the nation’s largest insurer raised its 2017 forecast again. Because UnitedHealth is the first health insurer to announce earnings every quarter, many analysts and investors see it as a bellwether for other insurers.
The insurer took a hit in last year’s quarter when losses from coverage linked to the Affordable Care Act came in $200 million above projections. UnitedHealth had jumped quickly into the ACA’s state-based insurance exchanges, which let people buy individual coverage with help from an income-based tax credit.
But the insurer also retreated rapidly after losses piled up in that business. It is selling coverage on exchanges in only three states this year, down from 34 last year.
UnitedHealth Group Inc. also took a revenue hit due to those exchange withdrawals.
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Health insurers, in general, have struggled to make money off the exchanges, and national competitors like Aetna, Humana and the Blue Cross-Blue Shield carrier Anthem also have pulled back from those markets.
Health insurance is UnitedHealth’s main business, but it has been focusing more on growing its Optum segment, which provides pharmacy benefits management and technology services and also operates clinics and doctor’s offices. Operating earnings from that business grew nearly 21 percent in the quarter to $1.5 billion.
In the quarter, UnitedHealth earnings climbed to $2.28 billion, with adjusted earnings totaling $2.46 per share. Total revenue rose nearly 8 percent to $50.05 billion.
Analysts expected earnings of $2.38 per share on $50.03 billion in revenue.
The company, based just outside Minneapolis, said Tuesday that it now expects 2017 adjusted earnings of between $9.75 and $9.90 per share. That’s up from a forecast of $9.65 to $9.85 it made in April.
Analysts polled by FactSet were expecting earnings of $9.80 per share this year.
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Source: CBS News – Moneywatch