Health Insurer Raises View -- WSJ

By Justina Vasquez and Anna Wilde MathewsFeaturesDow Jones Newswires

This article is being republished as part of our daily reproduction of articles that also appeared in the U.S. print edition of The Wall Street Journal (July 19, 2017).

UnitedHealth Group Inc. reported profit growth in the second quarter and raised its projections for the year, fueled by its Optum health-services arm, which highlighted the company's ongoing expansion of its role as a health-care provider and data-analysis shop.

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The biggest U.S. insurer has almost completely exited the Affordable Care Act marketplaces this year, which created a drag on revenue but also reduced pressure on UnitedHealth's earnings, as the company's net margin rose to 4.6% from 3.8% a year earlier.

That decision reduces the company's immediate exposure to the ongoing uncertainty in Washington. Republicans' efforts to pass a broad health overhaul bill through the Senate ran into potentially fatal resistance from Republican Senators Monday night, and Republicans said they would consider moving to repeal the ACA, with the shift taking effect in two years. Like other insurers, UnitedHealth may next year face the resumption of an ACA tax that is currently under a moratorium and had been expected to be repealed if Republican health-overhaul legislation passed.

During a call with analysts, UnitedHealth Chief Executive Stephen J. Hemsley generally steered clear of discussing the legislative state of play, referring briefly to uncertainty around national and state policy as a headwind for 2018 and declining to speculate about next steps. He also reiterated the company's opposition to the health-insurance tax, which he said was a specific headwind for next year and which he said would, if not canceled, "further destabilize the market, which is already fragile."

While UnitedHealth didn't offer specifics about its 2018 outlook, Mr. Hemsley offered broadly optimistic comments about the company's growth prospects.

UnitedHealth 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.

Revenue rose 7.7% to $50.05 billion, slowed by withdrawals from ACA individual markets, combined with the 2017 ACA health-insurance-tax deferral. Revenue from the Medicare business rose 17% to $16.7 billion. Optum's growth was tied to its OptumRx pharmacy-benefit management unit and its OptumCare ambulatory-care business, among other factors.

Analysts surveyed by Thomson Reuters had expected $50.06 billion in revenue.

UnitedHealth once again highlighted its rapidly growing footprint as a health-care provider, which was underscored by the recent acquisition of Surgical Care Affiliates Inc. The company said that Surgical Care Affiliates started a half-dozen new outpatient facilities so far this year, while its MedExpress urgent-care unit added 20 new clinics and it took over two new physician practices. UnitedHealth said it feels it is in the "early stages" of major expansion in its health-care provider business.

Optum overall saw earnings from operations grow 21% to $1.5 billion.

On the insurance side, UnitedHealthcare's medical-loss ratio -- the percentage of premiums paid in claims -- increased less than some analysts had projected, as the health-insurance tax deferral was offset by an improved business mix, product performance and favorable reserve development. It rose by 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, edged down 0.9% on Tuesday.

Correction to UnitedHealth story Optum is UnitedHealth's health-services arm. An earlier version of this article incorrectly stated the unit was UnitedHealth's health-benefits platform. (July 18, 2017)

Write to Justina Vasquez at and Anna Wilde Mathews at

(END) Dow Jones Newswires

July 19, 2017 02:48 ET (06:48 GMT)