By Tess Stynes and Anna Wilde Mathews
UnitedHealth Group Inc. Thursday said its first-quarter earnings
fell 7.8%, hurt by cuts to Medicare Advantage programs, taxes and
other aspects of the federal health law.
UnitedHealth is the biggest U.S. health insurer and the first to
report its results for the latest quarter, the first period to
reflect the full implementation of the law. Planned reductions in
government funding for Medicare Advantage and other provisions were
expected to affect results this year.
UnitedHealth said it had a profit of $1.1 billion, or $1.10 a
share, down from $1.19 billion, or $1.16 a share, a year earlier.
Revenue rose 4.5% to $31.7 billion.
Analysts polled by Thomson Reuters expected per-share profit of
$1.09 and revenue of $31.99 billion.
UnitedHealth said the health law pushed down earnings by around
30 cents a share, including via taxes and cuts to government
payments for Medicare Advantage, which is the private version of
the federal benefit program. The company also said it lost around
90,000 customers from its business selling insurance to individual
consumers, as it chose to play a very limited role in the law's
public marketplaces where consumers shop for coverage. But the law
also helped drive an increase of 255,000 people in UnitedHealth's
Medicaid plans.
The law "impacts every major line item" of the company's
results, said Stephen J. Hemsley, UnitedHealth's chief executive.
UnitedHealth also said it was leaning toward increasing its
participation in the public exchanges in 2015.
The company also highlighted more than $100 million in costs
tied to hepatitis C treatment in the first quarter across its
Medicaid, commercial and Medicare segments. Gilead Sciences Inc.'s
new drug Sovaldi costs around $84,000 for a standard 12-week
regimen to treat the liver-damaging illness. UnitedHealth said the
use was tied partly to pent-up demand, as patients had waited for
the new therapy.
UnitedHealth said it was seeing pressure in New York's
small-business market, where it said it believed competitors were
pricing at low rates that wouldn't be sustainable. However, the
company also affirmed its 2014 outlook.
At the end of the latest period, the number of people who had
health coverage through the UnitedHealthcare insurance business
reached 44.7 million, compared with 42 million a year earlier and
45.4 million people at the end of 2013.
UnitedHealth's medical loss ratio, which reflects the portion of
premiums used to cover health claims, fell to 82.5% in the latest
quarter from 82.7% a year earlier.
Revenue at the company's UnitedHealthcare insurance business
grew 3.6% to $29.25 billion. Revenue from Optum, the company's
health-services arm, rose 29% to $11.2 billion.
Write to Tess Stynes at tess.stynes@wsj.com and Anna Wilde
Mathews at anna.mathews@wsj.com
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