In 2013, insurance giant UnitedHealth Group saw revenues grow 11 percent but margins slip – a sign of industry pressures ramping up under health reform.
UnitedHealth's revenue grew more than $11 billion across its business lines between 2012 and 2013, to $122.5 billion, while operating margins fell from 7.6 percent to 6.4 percent, the company reported last week.
For 2014, United is projecting revenue of at least $128 billion, and net earnings per share of $5.40 to $5.60, in line with the $5.50 per share it brought investors for the full-year 2013.
The company added another 4.5 million customers in 2013 – about 170,000 of them in the fourth quarter – across commercial, military, Medicare, Medicaid and international health plans, to total 45 million members.
Enrollment increases were one source of revenue growth for the country's largest insurer. Another fairly large source was its technology, services and pharmacy unit, Optum, which includes the QSSI division operating the federal data hub for Healthcare.gov.
Optum saw year-over-year revenue growth of 26 percent for the full year and 35 percent in the last quarter, leading to $37 billion for the full year. And in contrast with the company as a whole, Optum's operating margin increased from just under 5 percent in 2012 to 6.2 percent last year.
For medical costs across health plans, UnitedHealth had an 81.5 percent cost ratio in 2013, an increase of just over 1 percent from 2012. The company's earnings report attributed that to "government reductions in Medicare Advantage program funding, a greater mix of revenues from government benefit offerings and lower levels of reserve development."
In UnitedHealth's commercial health plans, which added 3.2 million members last year, the company's medical cost ratio increased by only half a percent between 2012 and 2013, to 81 percent.
Overall a "diversity of products" drove "exceptional growth" for UnitedHealth last year, said CEO Stephen Hemsley during an earnings call with investors last week. "We move into 2014 with operational readiness and performance levels stronger than ever."
At the same time, the company, like others, is girding for some unpredictability in health insurance exchanges, Medicaid industry fees and Medicare Advantage rate reductions.
News outlets reported Hemsley saying during the call that the Medicare Advantage reductions of 6.7 percent this year and possibly as much next year are going to be "extraordinarily disruptive."
[See also: Sweeping changes to 2015 Medicare Advantage, Part D regs.]
For the federal health insurance fee being applied to Medicaid managed care plans, the company is expecting to be reimbursed by most states, noted an analysis produced by Citi Research. Citi's report noted that the company did not provide an exact number, but said between one-third and about half of the states officially confirmed that the fee would be reimbursed, while the others have committed verbally.
Still, as Citi Research analyst and report author Carl McDonald noted, the health insurance fee in Medicaid may end up being a source of strife for managed care organizations because health plans "can't record any additional revenue associated with the industry fee until they have signed agreements with each state."
"We continue to believe that Medicaid plans will have difficulty fully collecting the industry fee, a scenario that would result in margin pressure," McDonald wrote in the analysis following UnitedHealth's earnings post.
This story is based on a report published on Healthcare Payer News.