Executives at UnitedHealth Group Inc. (NYSE:UNH) seem to be much more enthusiastic about the Medicare and Medicaid plan markets and about the health care services market, than about the commercial health insurance market.
The executives talked about the many, growing opportunities that await the company in markets other than the commercial health insurance market during a conference call they held to go over fourth-quarter earnings with securities analysts.
The company warned investors in November that it would be recording a big charge for the fourth quarter due to concerns about high Patient Protection and Affordable Care Act (PPACA) individual exchange plan claims.
In spite of the problems in the individual exchange business, UnitedHealth as a whole is reporting $1.3 billion in net income for the quarter on $44 billion in revenue, compared with $1.5 billion in net income on $33 billion in revenue for the fourth quarter of 2014.
Operating earnings at the UnitedHealthcare health insurance unit fell to $949 million, from $1.7 billion.
Operating earnings at the Optum unit, which sells other types of services, such as consulting services and analytical services, increased to $1.5 billion, from $1 billion.
Commercial plan enrollment increased to 30 million, from 29 million a year earlier.
Enrollment increased to 7.3 million, from 6.8 million, in the Medicare Advantage and Medicare supplement plan markets, and to 5.3 million, from 5.1 million, in the Medicaid plan market.
For more about what the company and its executives are saying about life in PPACA world, read on.
1. Exchange blues.
UnitedHealth is starting 2016 with about 700,000 Patient Protection and Affordable Care Act (PPACA) exchange plan enrollees, up from about 500,000 2015 enrollees in December. The company says it expects the number of 2016 enrollees to decline over the course of the year.
The company says it lost $475 million on individual exchange plans in 2015 and may lose about $500 million more on the plans in 2016.
UnitedHealth recorded a charge of $364 million, net of tax effects, for the fourth quarter for actual and future exchange plan losses.
“We are not pursuing membership growth, and have taken a comprehensive set of actions to contain membership and sharpen performance over the balance of 2016,” Larry Renfro, the chief executive officer of the Optum unit, said during the call.
David Wichmann, president of the parent company, left open the possibility that UnitedHealth could be selling some exchange plans next year.
“By mid-2016, we will determine to what extend if any, we will continue to offer products in the exchange market in 2017,” Wichmann said.
At roughly the same time Wichmann made that statement, the Centers for Medicare & Medicaid Services (CMS) posted a blog in which the head of the exchange program said exchange managers would try to do more to address health insurers’ concerns about consumers trying to get around one of the systems’ few defenses against adverse selection, the open enrollment period system.
A CMS official said HealthCare.gov will try to make access to coverage available outside the open enrollment period only to consumers who can prove they really qualify for special enrollment periods (SEP).
2. Medicare and managed Medicaid programs are looking beautiful.
Steve Nelson, the head of UnitedHealth’s government plan division, said he thinks the company has improved relationships with network providers and patient engagement in ways that have increased the company’s ability to hang on to Medicare Advantage plan enrollees.
The company is looking forward to Medicare Advantage program growth in 2017 and beyond, Nelson said.
During the open enrollment period for 2016, growth was “very much in line with our expectations,” Nelson said.
Wichmann said UnitedHealth’s managed Medicaid unit has added contracts for plans with 2 million enrollees in the past two years.
“Managed Medicaid continues to emerge as the ultimate long-term sustaining solution for states,” Wichmann said.
The company actually lost money on state Medicaid contracts, but executives said the company’s experience at improving Medicaid enrollees’ health should help it do better in states in which it already runs Medicaid plans.
See also: Medicaid market player list holds steady
3. Executives said little about agents, brokers or the group health insurance market.
One securities analyst used the word “agent,” when referring to the Medicare plan market. UnitedHealth executives never referred to agents, brokers or producers.
Jeff Alter, the head of UnitedHealth’s commercial business, said the failure of Health Republic Insurance of New York gave the company the ability to win back some small-group business in New York state.
Wichmann said the company sees more of its commercial health customers using tiered networks to help hold down costs.
Stephen Hemsley, the CEO of UnitedHealth as a whole, said, “We are confident our benefits businesses have appropriately priced our products for 2016.”
Have you followed us on Facebook?