Health Insurance

UnitedHealth is positioning for growth amid Obamacare uncertainty

Skolnick: UnitedHealth is like clockwork, can make money off it

UnitedHealth Group was one of the first insurers to raise a red flag about losses on Obamacare plans, and as the expected repeal of the health-reform law proceeds under the incoming Trump administration, CEO Stephen Hemsley said his firm is well-positioned to handle new policy changes that come out of Washington.

"We think we have been developing the kind of assets and capabilities to serve a health-care system, and can accommodate a variety of approaches," Hemsley told analysts on the company's fourth-quarter earnings conference call, adding "that has been our narrative with the policy community."

When asked whether he'd been in touch with President-elect Donald Trump, Hemsley would only say that at this point the company's contact had been at "a high level" and that it will continue to advance "a simpler, state-based health-care system," which presumably means undoing much of the complexity imposed by the Affordable Care Act.

UnitedHealth's profits in the fourth quarter exceeded analyst expectations. The health insurance and services giant posted earnings of $2.11 per share, compared to a Thomson First Call estimate of $2.07 per share, on revenue of $47.52 billion. Profits rose more than 50 percent from a year ago, when the company took a charge for losses on Obamacare exchange plans. The company does not expect exchange plans to impact results in 2017.

The Optum health services division continues to power the company's overall growth. Full year 2016 revenue rose 24 percent from year ago, despite a decline in its OptumRX pharmacy benefits management unit, while profits were up more than 32 percent.

The company said it plans to expand its medical services business to help gain better control on its insurance members' health-care costs. OptumCare is now providing medical care in more than two dozen markets, and the recent $2.3 billion deal to acquire Surgical Care Affiliates will help give it greater scale by increasing its medical care footprint to another 17 markets.

Health savings accounts in focus

UnitedHealth is also a growing player in the market for health savings accounts, through Optum Bank, which now has more than $7 billion in consumer health assets, after acquiring Wells Fargo's HSA business in 2016 and U.S. Bancorp's business in 2015.

"Since Optum is mostly used for employer-based HSA plans, they have a large captive audience. It is convenient for employees to enroll with Optum, so most do it as a default. This is a reason for the large growth in their plans," said Dr. Carolyn McClanahan, a physician and certified financial planner with Life Planning Partners.

Acquisitions have helped Optum Bank become the nation's largest HSA administrator by assets, ahead of HealthEquity and HSA Bank, a division of Webster Financial, according to researchers at Devenir Group.

The HSA account business has grown roughly 25 percent annually, but the industry could be poised for even bigger growth under the Trump administration and Republican-controlled Congress, which are signalling that HSAs could be a key part of their health-reform plans.

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"It has the potential to grow even faster — could it be 30 to 50 percent?" said Eric Remjeske, Devenir Group president and co-founder, who says expansion of health savings accounts could see major banks trying to come back into the market after shedding assets in recent years.

"I think at some point they're going to realize that this is a product and a business line that's here to stay," said Remjeske. "The assets are pretty sticky."

UnitedHealth executives did not elaborate on plans for Optum Bank growth, or address any potential GOP policy to expand health savings accounts on the conference call.

UnitedHealth's Hemsley said the company is advocating for the same policies it expects will make the health system work better.

"We have been on this for some time, prior to the outcome of any election, etc. So, we would have been indifferent in terms of who had proceeded," Hemsley said.