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| Customers wait to speak with representatives at a UnitedHealthcare store in New York. UnitedHealth has derived growth from Medicare, the U.S.-funded program for the elderly, and has the biggest Advantage program with 3 million enrollees. Photographer: Michael Nagle/Bloomberg UnitedHealth Group Inc., (UNH:US) the biggest U.S. health insurer, said first-quarter profit fell 7.8 percent, hurt by cuts to its Medicare Advantage program for elderly and disabled Americans.
Net income fell to $1.1 billion, or $1.10 a share, from $1.19 billion, or $1.16, a year earlier, the Minnetonka, Minnesota-based company said today in a statement. Earnings beat by 1 cent the $1.09 per share average (UNH:US) of 22 analyst estimates compiled by Bloomberg.
UnitedHealth has derived growth from Medicare and has the biggest program among publicly traded insurers, with 3 million enrollees. In April, the government implemented a second round of cuts to Medicare Advantage, insurers’ private version of the program, as required under the Patient Protection and Affordable Care Act. The cuts, along with the impact of sequestration and other health reform fees, reduced UnitedHealth earnings by almost 35 cents a share, according to today’s statement.
Without the loss due to cuts from Medicare and other provisions of the Affordable Care Act, “they would’ve been at $1.45 this quarter, and that’s a lot of growth,” Sheryl Skolnick, a Stamford, Connecticut-based analyst at CRT Capital Group, said in a telephone interview. “Between the sequestration, the tax, and the Medicare Advantage cuts, that’s a big nut to overcome.”
Medicare’s actuaries have said the cuts will result in a decline in enrollment for the first time since 2004.
Revenue Gain
Revenue rose to $31.7 billion from $30 billion a year ago, as its Optum technology business helped to offset the Medicare Advantage cuts. While UnitedHealth has limited exposure to the public exchanges, its Optum unit has been credited with helping to fix the federal website for Obamacare plans, and has since been hired by several state websites. Revenue from the Optum unit jumped 29 percent to $11.2 billion.
“There’s a lot of reliance on Optum,” Skolnick said. “When you’re growing a part of your business, even a relatively small part, at that clip, it’s meaningful.”
Shares of UnitedHealth, the first of the major insurance companies to report earnings this quarter, fell (UNH:US) 1.7 percent to close at $78.19 in New York trading yesterday.
To contact the reporter on this story: Caroline Chen in New York at cchen509@bloomberg.net
To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Angela Zimm, Kristen Hallam
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