December 2, 2008 / 1:16 PM / 11 years ago

UPDATE 2-UnitedHealth sees commercial enrollment down in '09

(Adds company comments from investor day, shares, byline)

By Lewis Krauskopf

NEW YORK, Dec 2 (Reuters) - Insurer UnitedHealth Group Inc (UNH.N) said on Tuesday it expects enrollment in its commercial health plans for employers to drop by as many as 1.5 million members next year as it holds firm on pricing and grapples with the weak economy.

As a brutal year for UnitedHealth and its industry comes to a close, the largest U.S. health insurer by market value acknowledged at its annual investor conference that it faced a challenging environment, due to the economy as well as the prospects for healthcare reform.

UnitedHealth’s diverse business model and its strong capital position means it can capitalize on the broader adversity, CEO Stephen Hemsley told investors.

“Leading companies take advantage of disruptive change in challenging markets,” Hemsley said at the conference, which was broadcast over the Internet. “It was for times like these that our adaptable enterprise was created.”

The Minneapolis-based company, whose shares were little changed in morning trading, expects commercial enrollment losses to continue next year after seeing declines in that segment in 2008, excluding acquisitions.

That 2009 commercial forecast includes declines of between 450,000 to 800,000 enrollees for its more lucrative plans, for which the company assumes full insurance risk.

Partially offsetting the commercial weakness are expected gains next year for its Medicare plans for seniors and Medicaid plans for low-income Americans, where UnitedHealth holds leadership positions. Its Medicare Advantage plan enrollment is expected to climb by between 100,000 and 135,000 members next year.

Hemsley said UnitedHealth would focus on controlling operating costs next year, acknowledging that the company overbuilt.

Like most health insurers, UnitedHealth has endured a rough year. UnitedHealth twice reduced its 2008 earnings expectations earlier in the year amid challenges for its commercial business for employers and its Medicare plans for seniors.

Health insurers also have been pressured in recent weeks because of concerns about their investment portfolios amid the global credit crisis.

Through Monday, UnitedHealth’s shares had fallen 65 percent this year in line with the decline for the S&P Managed Health Care index .GSPHMO.

In October, UnitedHealth issued a 2009 profit outlook that includes the possibility of an earnings decline next year, a scenario it reiterated on Tuesday.

The company said in October the economic climate severely limited its visibility into next year and assumed layoffs stemming from the troubled economy would hurt its enrollment.

UnitedHealth shares were off 2 cents at $20.10 in morning trading on the New York Stock Exchange. (Reporting by Lewis Krauskopf; Editing by Steve Orlofsky, Dave Zimmerman)

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