UnitedHealth reports mixed bag in Q1

UnitedHealth Group reported a mixed bag in its first quarter financial report.

UnitedHealth Group posted first quarter net earnings of $1.1 billion, or $1.10 per share, down a bit from $1.16 per share in first quarter 2013, but in line with guidance forecasting some $0.35 per share being consumed by the ACA insurance tax and other reform changes.

'This has really been the first quarter under the full ACA,' said Stephen Hemsley, UnitedHealth Group president and CEO, during an earnings call. 'Everything else for the past three years has been a preamble.'

The company brought in total revenue of $31.7 billion for the three months ending March 31 - $1 billion more than in last year's first quarter. Of the $31.7 billion, $28.1 billion came from insurance premiums, compared to $27.2 billion in first quarter 2013. Revenue from services and products, including the Optum technology division, also grew, from $2.86 billion to $3.4 billion.

Net earnings, however, fell year over year from $1.2 billion to $1.09 billion. Along with premiums, medical costs grew, too, from $22.5 billion in first quarter 2013 to $23.2 billion in this year's first quarter.

UHG's commercial medical loss ratio improved by 100 basis points compared to last year's first quarter, at 77.3 percent, while the public sector MLR was fairly stable at just above 85 percent, making for a consolidated MLR of 82.5 percent.

Among some high areas of medical costs were specialty medications to treat hepatitis. Hepatitis drugs like the new drug Sovaldi can cure most patients with the hepatitis C virus and prevent liver disease at the cost of about $1,000 per pill and upwards of $70,000 for a multi-week treatment course.

Across its commercial and public sector insurance segments, UHG said it spent about $100 million treating hepatitis C in the first quarter. In Medicare Part D, some of the company's hepatitis C treatment costs are being offset by the reinsurance program, as patients quickly surpass the 'donut hole' threshold, and in Medicaid, the company is hoping to end up recouping some of what it's spending as well.

'It is a cost to the program that wasn't priced in,' UnitedHealthcare CEO Gail Boudreaux said of hep. C spending in Medicaid. 'We're working with states on that funding gap and ... expecting that it will be reimbursed.'

UnitedHealthcare, the main insurance part of UHG, posted an operating margin of 4.8 percent this past first quarter, down from 5.7 percent in first quarter 2013, and Optum also took a decline, from 6.2 percent to 5.8 percent. UHG posted a consolidated operating margin of 6.5 percent, down from 7.1 percent in last year's first quarter.

Total membership grew compared to last year's first quarter, but slipped from 2013's total, from 45.4 million as of December 31 to 44.6 million this past first quarter, including 4.6 million international insureds.

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