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.