(AP photo/Jim Mone)

UnitedHealth Group Inc. executives say the company is facing Medicare funding pressure, problems with increasing Medicare plan quality ratings and the effects of health system change on commercial customer psychology.

The executives talked about the market headwinds today during a call with securities analysts.

UnitedHealth (NYSE:UNH) organized the call to discuss third-quarter earnings. The company is reporting $1.6 billion in net income for the quarter on $4.3 billion in revenue. Net income was down 0.4 percent, and revenue was down 0.8 percent.

The company ended the quarter providing or administering health coverage for 45 million people, up 24 percent from the number it was covering a year earlier.

One challenge is that the government is trying to shift some funding for Medicare Advantage plans to plans that earn ratings of four stars or higher on a five-star scale. UnitedHealth has been increasing plan quality ratings, but not as quickly as it would like, and some of the increases will not help the company collect star-linked bonus payments until 2015, executives said.

In the commercial market, executives said that many employers that have had fully insured coverage are moving to self-funding, and that many buyers of group and individual health insurance are moving to high-deductible, account-based health plans. Account-based plans typically have lower premiums than conventional plans.

About 20 percent of the consumers with UnitedHealth individual or group commercial insurance now have account-based coverage, the company said. 

In the commercial individual and small-group markets, the company is trying to stick with a disciplined, consistent approach to pricing, even if that means giving up some market share in the short-term, executives said.

Gail Boudreaux, head of the company’s UnitedHealthcare unit, said the company is seeing “selective disruptions” in local commercial markets in terms of enrollment and pricing. 

Jeff Alter, head of the company’s employer and individual business, said that the pipeline for new business at big, national employers and and additional business at existing national accounts is the smallest the company has seen in years.

Because of all of the uncertainty about the Patient Protection and Affordable Care Act (PPACA), “many of our national account clients satstill,” Alter said.

PPACA is set to make many changes in the rules for non-exchange coverage in 2014. One is a requirement that carriers sell coverage on a guaranteed-issue, mostly community-rated basis.

“That’s something we’re well prepared for,” Boudreaux said.

Many states UnitedHealthcare is in already impose similar requirements, Boudreaux said.

See also: