(Adds analyst comment, updates share movement)
By Ransdell Pierson
July 17 UnitedHealth Group Inc, after
wading cautiously into Obamacare insurance exchanges this year,
on Thursday vowed to become a major player, participating in as
many as two dozen state exchanges in 2015 and growing from
Shares of the largest U.S. health insurer, which reported
sharply higher-than-expected second-quarter results earlier in
the day, were up 2.8 percent at $86.14 in afternoon trading
after hitting a 52-week high of $87.22.
UnitedHealth participates in about a dozen exchanges under
the federal Affordable Care Act, President Barack Obama's
signature healthcare legislation. The company offers insurance
to both individuals and small groups.
"This is a good long-term market," Gail Boudreaux, who runs
the company's healthcare business, said on a conference call
with analysts. She estimated that more than 75 percent of
potential insurees from various state exchanges had yet to
Chief Executive Officer Stephen Hemsley said he expected the
exchanges to become an established sector in the healthcare
marketplace that UnitedHealth can ill afford to pass up.
"By participating moderately this year and then watching
closely and listening, we have learned about pricing, networks,
regulatory structure, distribution, and the consumer's mindset
regarding public exchanges," Hemsley said.
Morningstar analyst Vishnu Lekraj said business from the
exchanges would be less profitable for UnitedHealth and its
rivals than their other business segments. "But the companies
all have to be there if they want to drive membership growth and
UnitedHealth said its second-quarter results had benefited
from cost cuts, the addition of 270,000 healthcare members and
strong growth in its Optum health technology division.
The company specializes in employer-based plans and
government health programs, as well as health technology.
Leerink Swann analyst Ana Gupte said UnitedHealth's profit
beat analysts' estimates largely due to investment income and
cost cuts, rather than favorable trends within core operations.
"Overall, they had a profit beat, but it's mainly from
(controlled) sales, general and administrative expenses," Gupte
The company's medical loss ratio, the percentage of premiums
spent on healthcare expenses, rose slightly to 81.6 percent.
UnitedHealth said costs within its commercial business were
moderate and consistent with expectations.
Gupte called that "a good signal for the rest of managed
care" as other companies report results in coming weeks. But she
said profitability of the commercial business was worse than she
expected, likely due to pricing pressures in New York and the
$84,000 cost of Gilead Sciences Inc's new Sovaldi pill
for hepatitis C.
UnitedHealth earned $1.42 per share, excluding special
items, well above the average forecast of $1.26 from analysts
surveyed by Thomson Reuters I/B/E/S.
Company revenue rose 7 percent to $32.6 billion. Wall Street
expected $32 billion.
UnitedHealth raised the low end of its full-year profit
outlook to $5.50 per share from $5.40 while keeping the high end
(Additional reporting by Shailesh Kuber in Bangalore; Editing
by Lisa Von Ahn)