UnitedHealth Group Inc (NYSE:UNH) said on Tuesday that it expects U.S. healthcare reform to have a net drag on earnings of 90 cents to $1 per share in 2014 due to changes in the individual and Medicare businesses as well as new taxes and fees.
The largest U.S. health insurer broke down that total cost into 5 cents to 10 cents per share for reforms in the individual market, 25 cents for cuts in funding for privately-run Medicare plans for the elderly and 65 cents per share for reinsurance and other fees, according to documents issued at a meeting with investors in New York.
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The insurer fees total $1.3 billion to $1.4 billion and will be paid in the third quarter, while the reinsurance fees are estimated at $500 million and will be paid in the first quarter of 2015, the company said.
UnitedHealth said it will be several years before the insurance market works through the changes related to President Barack Obama's healthcare reform law.
While the law, known as the Affordable Care Act, was passed in 2010, many of its key components go into effect in January of 2014. New health insurance exchanges began selling subsidized plans for the individual market on October 1 and Medicaid plans for the poor have been expanded to a larger income bracket in many states.
UnitedHealth is selling these new individual plans in 5 states - a smaller presence than that of competitors like WellPoint Inc <WLP.N> and Aetna Inc <AET.N>, which are launching products in more than a dozen markets each.
Technology problems at HealthCare.gov, the federal website serving 36 states, have hobbled enrollment in the past two months, though the government has said new fixes to the site are already allowing a much greater number of people to shop for plans. The other 14 states are running their own exchanges, several of which have also had technical problems.
Meanwhile, about half of U.S. states have agreed to expand their Medicaid programs under the law, which provides all of the funding for the new enrollees for the first three years. UnitedHealth said that more business from Medicaid could add up to 5 cents per share in earnings during 2014.
UnitedHealth said that its own improved business performance would offset these negative effects and forecast 2014 earnings in a range of $5.40 to $5.60 per share, compared with 2013's estimated $5.40 to $5.50 per share of profit.