UnitedHealth 3Q revenue up 6%, CEO wary of future

As UnitedHealth Group reported better-than-expected third quarter earnings, its chief exec forecast that healthcare usage will rise and cautioned that certain industry conditions, such as increased oversight and medical costs, will get tougher.

The largest U.S. insurer's revenue increased 6 percent to $23.64 billion, while its subsidiary OptumHealth increased revenue 22 percent to $7.2 billion. UnitedHealth attributed its strong performance to membership gains, as it saw increased enrollment in every product category for every quarter for a year. Enrollment rose 5 percent to 34.4 million people during the third quarter compared to last year's quarter, the Minneapolis Star Tribune reports.

UnitedHealth's profit of $1.27 billion dropped slightly from $1.28 billion a year ago, while per-share earnings rose to $1.17 from $1.14 a share a year earlier. It also raised its full-year earnings forecast--for the third time this year--to a range of $4.40 to $4.45 a share on revenue exceeding $101 billion, according to the Wall Street Journal.

Despite the overall positive quarter, UnitedHealth CEO Stephen Hemsley took a cautionary tone when speaking with healthcare analysts. "The challenges are considerable," he said, pointing to economic and regulatory uncertainty, as well as increased price competition in certain commercial markets, the Star Tribune notes. "I think caution is the appropriate tone to set at this stage in the environment, both on the broad economic play and in the healthcare domain."

He added that although earnings likely will grow next year, high unemployment rates and the health reform law will pressure UnitedHealth's performance. He noted that the company's medical costs also rose 7 percent to $18.41 billion, and it saw a "modest increase" in utilization trends for doctor's offices and outpatient care, according to the Associated Press.

UnitedHealth's medical-loss ratio rose to 80.7 percent from 80.1 percent a year earlier, although that was a decline from 81.4 percent in the second quarter, the WSJ notes.

"In general, United has done very well on the revenue front," says Morningstar healthcare analyst Matthew Coffina. "They've been helped by diversification into services [with Optum], which is something their competitors don't have," he said, and that combination gives them a "favorable outlook compared to their peers," reports the Star Tribune.

To learn more:
- read the Wall Street Journal article
- see the Minneapolis Star Tribune article
- check out the Associated Press article

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