Notwithstanding resistance in California and some long-term uncertainty, the nation's largest insurer is pretty stoked about 2015, public exchanges and Medicaid.
UnitedHealth Group posted 2014 financials and its outlook for 2015, and both are pretty bright -- as its stock value soared to a 52-week high of $108.98 per share.
The company exceeded analysts expectations, with fourth quarter 2014 earnings of $1.55 per share on revenue that grew 7 percent to $33 billion. For the full year 2014, UnitedHealth Group posted net earnings of $5.6 billion, at $5.70 per share, on $130.5 billion in revenue.
As it has been for several years now, United's Optum technology and services subsidiary was a big contributor to growth. "Optum had a remarkable year in 2014," said United CEO Stephen Hemsley, noting that revenue grew 25 percent and operating margins expanded to 6.9 percent.
In its core business of insurance in private and public health plans, United saw growth as well. Insurance premium revenue grew by 6 percent, with medical costs increasing by 4 percent.
Its medical cost ratio, what Hemsley calls "the best overall metric describing medical cost performance across UnitedHealthcare's diverse benefits businesses," was 80.9 percent in 2014 and is expected to remain around there or just below it for the full year 2015.
Much of the membership and insurance revenue growth has been in public plans. United added 1 million Medicaid managed care members in 2014, along with 295,000 seniors in Medicare supplemental plans and 215,000 seniors in stand alone Part D drug plans, even as the company exited certain markets where 150,000 seniors had to find a new issuer.
On the commercial side, although revenues declined by 4 percent in 2014, the small group, middle market and self-funded plans look promising, Hemsley said.
In between, in the subsidized private plan market, United is also seeing membership growth, thanks to a dive into more than 19 exchanges for the 2015 plan year.
After enrollment for 2015 closes in February, United expects some 500,000 Americans to be covered on its exchange plans across 23 states, including Arizona, Alabama, Colorado, Connecticut, Florida, Illinois, Massachusetts, New York, Pennsylvania and Texas.
With 400,000 exchange members as of mid-January, "We are ahead of schedule, reflecting the brand value and trust in the UnitedHealthcare name," said Hemsley.
The ACA exchanges, Medicaid and Medicare are the growth areas for all insurers, with commercial insurance enrollment set to stagnate, thanks to an evolving economy with an increasingly freelance and part-time workforce, aging baby boomers and more businesses sending employees to the public exchanges.
"I think the growth in the exchanges both in 2014 and in 2015 are really driven by the uninsured and that expansion through the subsidy," said Jeff Alter, chief of UnitedHealthcare's employer and individual business.
Looking ahead, Hemsley added, "We're really seeing growth on the exchange, off the exchange, and in the self-funded marketplace too."
Except in California, as Alter noted. "In California we are disappointed, we wanted to bring more choice and options to the residents."
Covered California, the state exchange, recently adopted rules limiting insurers that have sat out the exchanges to selling in only a handful of underserved areas, a kind of regulatory reward for those that took early bets in an uncertain market with many high-risk individuals.
The exchange's rules for 2016 prohibit new insurers that are neither existing Medicaid managed care plans nor newly licensed in the state, except the four underserved rating areas with less than three choices of issuers.
"We think the health plans that helped make California a national model should not be in essence undercut by plans that sat on the sidelines," Covered California executive director Peter Lee said as the board adopted the rules.
"We are reviewing that now so we might be in California in 2016, but in a small handful of markets, and we will go back in 2017," said UnitedHealthcare's Alter. "We believe choices and competition are good for all markets including California."