CORRECTED-UPDATE 2-UnitedHealth profit falls as U.S. government payments decline

Thu Apr 18, 2013 8:19am EDT

(Corrects last paragraph to show switching to fee-based from risk-based)

April 18 (Reuters) - UnitedHealth Group Inc, the largest U.S. health insurer, said on Thursday that its first-quarter profit had fallen, in part because of lower U.S. government payments for its private Medicare services and prescription plans for older Americans.

The company said net profit was $1.2 billion, or $1.16 per share, down from $1.4 billion, or $1.31 per share, a year-earlier.

Analysts on average had been expecting earnings of $1.14 per share, according to Thomson Reuters I/B/E/S.

UnitedHealth is facing higher operating costs related to a rise in the prices that doctors and other providers charge for the medical services they perform. In addition, the Affordable Care Act requires it to provide more benefits in some plans, has increased taxes and sets limits on its profits.

The company, which acts as both an administrator of health plans for large corporations and provides health insurance plans, said that 5.6 million consumers were in its consumer-directed health-care products in the first quarter, up 18 percent year over year. In those plans consumers pay directly for a larger share of medical costs.

For the year, UnitedHealth said it still expected earnings of $5.25 to $5.50 per share, but the government sequestration would affect the top end of the range. Its outlook did not account for those across-the-board spending cuts. Analysts are expecting earnings of $5.52 per share in 2013.

Revenue rose to $30.3 billion from $27.3 billion a year ago, helped by membership growth. The company added 1.1 million new members during the quarter to total 86 million as of March 31.

UnitedHealth said that in the first-quarter it converted a large public-sector customer from risk-based insurance to fee-based benefits, which will reduce 2013 revenue expectations by $2.5 billion to $122 billion. (Reporting by Caroline Humer; Editing by Lisa Von Ahn and Maureen Bavdek)

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