UnitedHealth expects to adds 3.5 million to 4 million members in 2013

Tue Nov 27, 2012 5:57pm EST

(Reuters) - UnitedHealth Group Inc (UNH.N), the nation's largest private insurer, said on Tuesday it would add 3.5 million to 4 million new members next year, indicating slower growth than expected from 2012 because of a decline in fully insured commercial customers.

UnitedHealth, whose membership is expected to grow about 6 percent this year, said growth in 2013 would be the result of adding customers in its Medicare Advantage government healthcare programs for the elderly, its international business and its commercial fee-based plans, or self-insured business.

UnitedHealth, which expects to have 83 million members at the end of 2012, said providing full insurance to companies will contract next year as more businesses hire it to manage healthcare benefits, but cover those costs themselves.

The detailed outlook came during a presentation for analysts that was webcast one day after UnitedHealth said in a statement that it expects 2013 earnings of $5.25 to $5.50 per share.

"We assume modest growth in employment with the unemployment rate hovering around 8 percent," Chief Financial Officer David Wichmann said on Tuesday.

He said UnitedHealth has not factored into its outlook the possible effects of the "fiscal cliff" - tax increases and spending cuts scheduled for January 1 that could throw the United States back into recession and lead to automatic cuts in government medical payments and funding.

The insurer forecast operating costs would rise next year and expects to pay $165 million to comply with the new healthcare regulations, down slightly from the $195 million it estimated for 2012.

UnitedHealth shares were down 65 cents, or 1.2 percent, at $52.88 in afternoon trading on the New York Stock Exchange.

The United States is in the midst of massive healthcare reform that will speed up in 2014 with the creation of healthcare exchanges that offer policies to individuals and small groups. The 2010 Patient Protection and Affordable Care Act already has begun to transform the healthcare industry, requiring insurance plans to offer more preventative services to more people.

UnitedHealth said it was not sure how much it would cost to prepare health exchanges because it was awaiting specific regulations, but it expected to spend around $50 million to $100 million a year to be ready. It expects the plans offered on the exchanges to be about as profitable as its government programs, which have about a 3 percent to 5 percent return.

Wichmann still expects government payments for medical services, known as reimbursements, to continue to fall and that consumer use of medical services will remain the same in 2013 as in 2012. This low utilization rate has benefited insurers as they spend less on customer medical services.

The company expects the percentage of premiums paid toward medical costs to rise slightly in 2013 to 81 percent from the anticipated 80.5 percent in 2012 because of an increase in government business and related reimbursement pressures. It said lower costs at Brazil's Amil Participacoes SA AMIL3.SA, which it is in the process of buying, would help offset some of those factors.

(The first paragraph of this story has been corrected to show growth compared to 2012 not growth for 2012)

(Reporting By Caroline Humer in New York. Editing by Jilian Mincer and Andre Grenon)