Boston, MA 10/21/2013 (wallstreetpr) – UnitedHealth Group Inc. (NYSE:UNH) is the largest health insurance company in terms of revenues. It is the first to report quarterly results and is considered as a bellwether for the industry. The company declared its third quarter results recently and it could not beat the analysts’ expectations for the first time in five years. The third quarter earnings of $1.57 billion translate to $1.53 per share.
The results also suffered from an increase in costs. It spent 80.6% of the premiums on medical claims, an increase of 160 basis points over the same period last year. This was due to the cut by government in payments for Medicare Advantage. Government-paid plans carry a lower profit margin and the company has a large share of such plans. The company was able to add 275,000 members in the third quarter to its plans taking the total to 45.3 million people. Increases in the fees based business for corporations also lead to higher operating costs. Nearly 20% of the total members in either employer sponsored or individual plans are in the high-deductible plans. The company was able to drive down costs by directing patients to lower-cost treatments. The macro economic conditions also helped as patients preferred to postphone their treatments.
UnitedHealth is also worried about the effects of Obamacare on its revenues and profits. The company sees lower payments for other value added services like free gym membership, under the new provisions. Such provisions were contributing a significant amount to the company’s profits. The government is also planning to reduce government funding for Medicare Advantage plans for the elderly.
These observations were not taken kindly by the investors. The shares were down by 3.66% at the end of trading, closing at $68.76 per share on Friday. The investors had faith in the company’s ability to tackle the future, the shares had risen nearly 40% this year.
