Following ACA exchange exits, UnitedHealth beats Q1 earnings expectations

Wall Street
UnitedHealth announced its first-quarter earnings on Tuesday.

In its first earnings report since it pulled back from the Affordable Care Act exchanges, UnitedHealth raised its 2017 financial outlook on Tuesday after reporting better-than-expected results.

The country’s largest health insurer posted earnings of $2.17 billion in the first quarter. Its adjusted earnings per share of $2.37 beat the average analyst estimate of $2.17, Reuters notes. Its first-quarter revenues of $48.7 billion grew 9.4% since Q1 2016, and the insurer said it now expects 2017 revenues of about $200 billion.

UnitedHealth added 2.5 million medical members year over year, though that was partially offset by a reduction of 900,000 people served through individual market products. For the company's employer and individual segments, 2017 revenues of $12.7 billion were essentially flat year over year due to the insurer's withdrawal from almost all ACA exchanges and the effects of the health insurance tax deferral.

In his prepared remarks on an earnings call with investors on Tuesday, UnitedHealth CEO Stephen Hemsley noted that the company has been engaged with elected officials from both political parties to work on issues like improving healthcare access and affordability.

“Affordability can be improved most in the immediate term through lower taxes,” he noted, calling on Congress to act as soon as possible to repeal the health insurance tax in 2018.

Provisions in an omnibus spending bill suspended the tax for 2017, but UnitedHealth and the rest of the health insurance industry want it repealed completely. Hemsley noted during the call that at this point, the insurer is planning as though the tax will be implemented next year, adding that it will ultimately raise premiums.

In general, though, Hemsley’s remarks echoed the optimism he expressed on the insurer’s fourth-quarter 2016 earnings call about the direction healthcare policy is moving. Hemsley said he is particularly encouraged by the potential for more flexible, state-oriented health insurance marketplaces, but added that either way the company is poised to adapt to whatever policies arise.

“This UnitedHealth Group portfolio is flexible, adaptable, innovative and positioned to contribute constructively to virtually any change agenda,” he added.

Indeed, the company’s healthcare services arm, Optum, has thrived despite the uncertainty facing the healthcare sector. Optum revenues grew 7.9% year over year in the first quarter of 2017 to $21.2 billion, and earnings from operations increased by double-digit percentages in the first quarter for every Optum segment.

UnitedHealth shuffles leadership roles

Also during Tuesday's call, the company announced several moves in its executive ranks, a practice Hemsley noted happens every two to three years as a way to broaden the leadership team's experience.

Steve Nelson will become UnitedHealthcare’s overall CEO, and Dan Schumacher will serve as president, while Brian Thompson, the CFO of Medicare & Retirement, will now become the CEO of that segment. Meanwhile, Dirk McMahon will become Optum's operating president, John Price will lead OptumRx, Eric Murphy will head OptumInsight and Andrew Hayek, who joined the company via its merger with Surgical Care Affiliates, will lead OptumHealth.