UnitedHealth Group Inc (UNH.N) on Thursday reported a bigger-than-expected rise in second-quarter net income as it enrolled more people in private and government-paid health insurance plans and sold more health technology systems.
UnitedHealth reported net income of $1.44 billion, or $1.40 per share, compared with $1.34 billion, or $1.27 per share, a year earlier.
Analysts on average had expected earnings of $1.25 per share, according to Thomson Reuters I/B/E/S.
Revenue rose to $30.4 billion. Analysts had expected $30.5 billion.
The quarterly results come as the company, the largest U.S. health insurer and the first to report earnings for the period, prepares for more changes stemming from President Barack Obama's healthcare law, the Affordable Care Act.
Next year, the government will expand the Medicaid program for the poor in many states, and state-based health exchanges will start selling subsidized insurance to individuals. About 7 million people are expected to sign up for insurance next year.
UnitedHealth raised the low end of its 2013 outlook by 10 cents a share to $5.35 while keeping the high end at $5.50. Analysts had forecast $5.44.
While this quarter was strong, the forecast likely reflects pressure on profitability in insurance plans like private Medicare that are paid for by the government, which is cutting how much its pays for healthcare services, one analyst said.
"Changes in margin mix in the business, likely the (Medicare Advantage) and TriCare (military) segments, suggest that margin pressures still abound," CRT Capital analyst Sheryl Skolnick said in a research note.
UnitedHealth said the number of people enrolled in its insurance plans, including through small businesses, large corporations, the military, Medicare for the elderly, and Medicaid, was 89.2 million at the end of June, up from 86 million at the end of March.
The company said it had spent 81.5 percent of its premiums on medical claims during the quarter, an increase of 20 basis points from a year earlier.
The health reform law, known as Obamacare, sets targets for this ratio. It has also required many insurance plans to include more free preventative services.
Even so, insurers have benefited from Americans' reduced use of medical services over the past several years, a trend Skolnick said appeared to have continued this quarter.
Operating earnings were flat in the company's insurance business and increased in the Optum health technology unit, the UnitedHealth said.
(Reporting by Caroline Humer; Editing by Lisa Von Ahn)