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UnitedHealth Not Letting Up On Employers

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NU Online News Service, April 18, 7:12 p.m. – The UnitedHealth Group Inc. offered little hope for rate-shocked employers and brokers today at its first-quarter earnings conference.

The Minnetonka, Minn., health services company pleased Wall Street by reporting $295 million in net income for the quarter on $6 billion in revenue, up from $212 million in net income on $5.7 billion in revenue for the first quarter of 2001.

Overall earnings per share increased 30%, to 92 cents.

At the core Health Care Services unit, which includes the managed care operations, operating earnings increased to $278 million on $5.2 billion in revenue, from $226 million on $5 billion in revenue. Average unit revenue per insured member increased 14%, to $1,048.

But UnitedHealth has no intention of easing pressure on customers by accepting a lower rate of earnings growth from the managed care operations.

Instead, UnitedHealth will be trying to widen Health Care Services profit margins by about 5%, according to Dr. William McGuire, the company’s chairman.

“We’re going to remain committed to pricing discipline and appropriate product placement,” McGuire said.

Prices for insured commercial coverage are going up about 13%, with only a “prospect for modest slowing in the future,” McGuire said.

UnitedHealth is also continuing to take an aggressive approach to pruning unprofitable managed care customers.

The company continues to retreat from the Medicare health maintenance organization market, preferring to focus on the more profitable Medicare supplement insurance market.

UnitedHealth is also pulling away from programs that offer workers a choice of insurance from more than one carrier.

UnitedHealth has cut enrollment in the multi-carrier programs to 500,000, from 900,000 a year ago.

Carrier “menus” may be popular with employees, but “the cases carried very high medical cost-to-premium ratios, and each year they deteriorated by way of selection,” McGuire said.

McGuire said his company sees some signs of improvements in medical cost trends, due more to its own cost-control and care management efforts than any fundamental change in health care economics.

The pharmaceutical cost trend has fallen to an increase of about 10% to 12%, hospital cost trends are flat, and care management programs appear to be reducing the cost of treating conditions such as diabetes while improving the quality of care, McGuire said.

But costs for cardiovascular services, orthopedic services and gastroenterology services are still very high, and plan members are getting older and using more services, McGuire said.