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Despite exchange losses, UnitedHealth shows strength in 2Q

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Despite exchange losses, UnitedHealth shows strength in 2Q

UnitedHealth Group Inc. posted second quarter net income of $1.76 billion, up 11% year over year, as the company experienced “double-digit growth” in all of its U.S. business lines, the health insurer's CEO Stephen Hemsley said Tuesday in a conference call with investment analysts.

Still, Minnetonka, Minnesota-based UnitedHealth's second quarter revenue was hit by $200 million in losses from the plans it sold on public health insurance exchanges in 2016, because patients were sicker, driving up health care costs.

Those ACA exchange losses are in addition to previous estimates of $650 million in exchange losses for full year 2016 and were fully absorbed in second quarter results. That brings full year 2016 expected exchange losses to $850 million, a UnitedHealth spokesman confirmed Tuesday.

“Along with what we absorbed last quarter, first half 2016 results reflect an incremental $325 million in full year losses beyond the expectation established as we entered the year,” Mr. Hemsley said.

UnitedHealth has announced it will stop offering exchange plans in most states in 2017, and Mr. Hemsley affirmed Tuesday that the company does “not expect any meaningful financial exposure on 2017 business from the three or fewer exchange markets where we currently plan to remain.”

Despite the losses from the exchanges established by the health care reform law, revenue grew 28.2% from the year-earlier period, to $46.49 billion for the three months ended June 30, while revenue from premiums grew 13.9% year over year, to $36.41 billion for the quarter.

Once again, UnitedHealth's health services unit Optum Inc. was a major driver of growth, recording second quarter revenue of $20.62 billion, up 51.8% from a year earlier.

Within the Optum line of companies, revenue at pharmacy care services company OptumRx grew 69.1%, to $15.07 billion for the quarter; revenue at health services business OptumHealth grew 18.2%, to $4.07 billion; and revenue at health care software company OptumInsight grew 25.1%, to $1.76 billion.

UnitedHealthcare, the part of the business that provides commercial, Medicare and Medicaid health care benefits, recorded revenue of $37.56 billion, up 13.6% year over year.

As of June 30, total medical enrollment was about 48 million individuals, up 305,000 from the first quarter, thanks to “new members in Iowa and expanded services in New York,” Larry Renfro, UnitedHealth vice chairman and Optum CEO, said during the conference call.

“Looking at the company overall, we intend to carry strong 2016 business momentum into 2017, that will include investing in and improving our competitiveness for the years beyond 2017,” Mr. Hemsley said.

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