Dive Brief:
- UnitedHealth Group released an optimistic third quarter earnings report Tuesday, indicating the company is looking toward a brighter 2017 when it will shed the weight of the majority of its Obamacare business, which it has previously projected will cost the company a total of $850 million in losses this year.
- Although the company is holding discussion of its 2017 profit forecast until Nov. 29, President Dave Wichmann told investors the company is “comfortable” with analysts’ 2017 estimates of $9.10 a share, Bloomberg reported.
- Following the call, the company's stock increased as much as 6.4% based on its prediction of modestly stronger per-share growth in 2017. The stock closed at $143.47 at the end of day Tuesday, compared to a close of $134.13 on Monday.
Dive Insight:
UnitedHealth's third quarter profits were significantly driven by its Optum health services division during the first and second quarters. Optum revenue increased 9% to $21.1 billion, with some of that thanks to its 2015 acquisition of pharmacy-benefit manager Catamaran and because the company has notably been responsible for a growing segment of UnitedHealth's profits.
The company increased its 2016 profit forecast to a full $8 a share, up from $7.80 to $7.95, and its third quarter net earnings were up $2.03 per share, bringing growth in adjusted net earnings of 23% year-over-ear to $2.17 per share.
The insurer is positioning itself for an even stronger performance in 2017 by dropping the baggage of its marketplace plans in the majority of the 34 states where it currently operates them at a loss. It has been estimated to have a relatively small stake in the ACA markets, with ACA customers making up less than 1% of its total membership. According to Bloomberg, UnitedHealth reported 980,000 ACA-compliant individual customers at close of the third quarter, comprised of 770,000 exchange customers and 210,000 off-exchange customers.
More notable is the impact of the insurer's decisions on the rest of the market; its exit plan has bolstered arguments against the sustainability of the marketplaces and has contributed to a drop in competition due to numerous insurer pull-outs. The Kaiser Family Foundation estimated earlier this year that if the company were to withdraw entirely, it could cause 532 counties to drop from three ACA insurers to two, and another 536 counties to drop from two insurers to one.