UnitedHealth raises its 2017 outlook despite the uncertainty over Obamacare repeal

http://www.cnbc.com/2017/04/18/unitedhealth-raises-its-2017-outlook-de
BYBertha Coombs
Tuesday, 18 Apr 2017 | 1:48 PM ET
Michael Nagle | Bloomberg | Getty Images

UnitedHealth Group said it is confident it will post better-than-expected growth for the full year, regardless of what happens with health reform in Washington.

"In the longer term, policy changes that improve health care and the health system play to our strengths," said United CEO Stephen Hemsley on the company's earnings conference call Tuesday.

The nation's largest insurer's first-quarter earnings and revenues were stronger than expected, helped in part by its decision to exit the Obamacare individual market this year.

UnitedHealth executives say they have been engaged in talks with GOP officials in Washington about reforms that will help bring down health insurance costs, and they put an emphasis on the need to repeal the Affordable Care Act's tax on all health plans, including government health coverage.

"Affordability can be improved most in the immediate term through lower taxes. We hope Congress acts soon to permanently repeal the health insurance tax before it further worsens consumers' premiums, state budgets and seniors' benefits," said Hemsley. "We have no insight as to whether that will or will not occur."

While the ACA tax was suspended for 2017, United is pricing it into its plans for next year.

"Our plans continue to assume the tax will return in 2018, which will raise premiums and/or reduce benefits for commercial businesses, states and our nation's senior population," Hemsley said.

United reported adjusted first-quarter profits of $2.23 per share, 20 cents above the Thomas Reuters consensus estimate of $2.17 per share. On the top line, $48.7 billion in revenues also exceeded analyst expectations.

The company added 480,000 new members during the quarter in its commercial group insurance division, and one million new members in its Medicaid and Medicare Advantage plans.

The biggest driver of profit growth was the Optum health services unit, which posted 16 percent earnings growth for the quarter, and has tripled revenues since the launch of the division in 2011.

The insurer's diversified health-care strategy, bringing together insurance, pharmacy, primary care and data services has paid off in increased market share over the last two years, while its largest competitors Anthem and Cigna and Aetna and Humana pursued ill-fated mega-mergers.

"We are providing increasingly differentiated value to a more diverse set of markets than other and we are building deeper relationships with customers," said Hemsley.

United raised its full year 2017 revenue expectations to $200 billion, slightly above analyst expectations. By contrast, the combined 2017 full year revenue estimates for its three largest competitors Anthem, Aetna and Humana is $180 billion.

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