UnitedHealth could benefit from Trump's executive order

UnitedHealth sign
UnitedHealth now expects its adjusted net earnings to approach $10 per share for all of 2017.

UnitedHealth Group appears to have much to gain and very little to lose when it comes to President Donald Trump’s recent healthcare policy moves.

For one, the company “has a great deal of experience” in the types of policies that Trump’s recent executive order aims to expand: short-term policies, association plans and the expanded use of health reimbursement arrangements, CEO David Wichmann said during UnitedHealth’s third-quarter earnings call.

“We will be engaging with policymakers as the regulatory frameworks in these areas are developed over the next 60 to 120 days, and hope to elaborate once the process has concluded,” he added.

In fact, the insurer has about 300,000 members who are currently in association health plans, noted Dan Schumacher, president and chief operating officer of UnitedHealthcare. Furthermore, the company is excited about the possibility of regulators lifting the three-month limit on short-term policies, as they provide strong value for customers and could now be poised for growth.

Some are not so optimistic about the executive order, however. Experts from two major actuarial groups have warned that expanding the use of both types of plans could siphon young, healthy enrollees from Affordable Care Act-compliant plans, contributing to market instability. Another expert has pointed out that association health plans have a history of fraud and insolvency.

As for Trump’s other recent move—deciding to end cost-sharing reduction payments—Wichmann noted that UnitedHealth has only about 30,000 enrollees in four states who are CSR-eligible, and it submitted plans for 2018 both with and without the CSR payments.  

“Thus, we expect any impact to be extremely small,” he said.

Company reports strong third quarter, raises outlook

UnitedHealth reported an adjusted net earnings of $2.66 per share in the third quarter, representing 23% year-over-year growth and beating Wall Street’s consensus estimate by 10 cents.

The company also said that its third-quarter revenues grew 9% year over year to $50.3 billion. Optum’s earnings from operations grew 23% compared to the third quarter of 2016, and UnitedHealthcare’s grew 13%.

UnitedHealth now expects its adjusted net earnings to approach $10 per share for all of 2017. That represents a small bump compared the $9.75 to $9.90 estimate it made in the second quarter.

Looking ahead to 2018, Wichmann said the return of the health insurance tax is likely to be the most meaningful headwind for the company. A recent analysis commissioned by UnitedHealth projected that the tax’s return will increase premiums by an average of 2.6% next year.

Still, “we expect to continue strong growth for a long time,” said Wichmann, who took the helm as CEO on Sept. 1.