UnitedHealth Group Inc. reported profit growth in the second quarter, as the company works to recoup revenue lost from efforts to exit from Affordable Care Act markets.
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The plan to stop selling plans in ACA marketplaces also reduced pressure on UnitedHealth's earnings, as the company's net margin rose to 4.6% from 3.8% a year earlier.
UnitedHealth also on Tuesday raised its adjusted earnings-per-share guidance for the year to between $9.75 and $9.90, from between $9.65 and $9.85 previously.
Some analysts had projected a margin expansion would be due to UnitedHealth's and other health insurance providers' firm pricing power in the Medicare business. They also attributed the growth to the exemption from ACA taxes that health insurers like UnitedHealth were granted this calendar year. Credit Suisse analysts said that while the Medicaid market for individuals is still volatile amid Washington's health-care overhaul talks, UnitedHealth will likely have nearly minimized its exposure to that uncertainty by 2018.
Revenue rose 7.7% to $50.05 billion, slowed by withdrawals from ACA individual markets, combined with the ACA health insurance tax deferral. Revenue from the Medicare business rose 17% to $16.7 billion.
Analysts surveyed by Thomson Reuters had expected $50.06 billion in revenue.
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U.S. senators have pivoted their plans to overhaul the ACA, and are no longer seeking approval of a new health-care bill in the short term. Monday night, two more senators said they would oppose the GOP-backed measure, leaving the bill just shy of the necessary votes to pass it. This came after the Republican-led Senate said Saturday it would delay a vote on the bill previously scheduled for this week due to the unexpected absence of Sen. John McCain, a Republican from Arizona, and the opposition of two other Republican senators. Passage of the law would have eventually eliminated all of the ACA markets UnitedHealth has been withdrawing from.
The Optum unit, UnitedHealth's health-benefits platform, saw earnings from operations grow 21% to $1.5 billion. OptumRx, the company's pharmacy benefit manager, saw revenue growth of 5.1% to $15.8 billion.
The insurer's medical-loss ratio -- the percentage of premiums paid in claims -- increased as the health-insurance tax deferral was offset by an improved business mix, product performance and favorable reserve development. It rose to 20 basis points year-over-year to 82.2%.
The Minnetonka, Minn.-based company recorded a profit of $2.28 billion, or $2.46 a share, compared with $1.75 billion, or $1.81 per share, a year ago. Excluding certain items, UnitedHealth earned $2.32 a share, compared with $1.96 a year ago. Analysts had anticipated the company reporting a profit of $2.23 a share.
Shares in UnitedHealth, up 32% from a year ago, fell 0.5% to $185.35 in premarket trading.
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(END) Dow Jones Newswires
July 18, 2017 07:52 ET (11:52 GMT)