How Obamacare Will Affect UnitedHealth Group – Part 1

by Trefis Team
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UnitedHealth Group (NYSE:UNH) is the largest health insurer in the U.S., accounting for over 14% of the total private health insurance enrollments in the country. With strong fundamentals and market position, UnitedHealth is well placed to capitalize on the increase in market size brought on by the implementation of the Patient Protection and Affordable Care Act (PPACA), or commonly known at Obamacare.

The PPACA was signed into law by President Barrack Obama in March 2010, to increase health insurance coverage and affordability amongst the uninsured in the U.S. Around 30 million Americans are currently not covered by any form of health insurance. [1] The act offers subsidies to low income individuals and families with income below the federal poverty level and also requires policies to be issued regardless of community rating or medical condition. Insurers are required to offer the same premium to all insured parties of the same age and location, regardless of gender or pre-existing condition.

Other important reforms included within the act include the setting up of health insurance exchanges in each state allowing individuals and businesses to compare policies and premiums and choose the one best suited for them, as well as the employer mandate which requires companies with 50 or more employees to provide affordable insurance to their employees. The PPACA has also established a minimum medical care ratio (medical costs divided by premiums) for health insurance providers like UnitedHealth. The minimum ratio mandated by the act is 80% for individual and small group plans, and 85% for large group plans.

The act brings both positives and negatives for UnitedHealth. While the company is likely to benefit from increased enrollments and insurance penetration in the U.S., it might also lose market share due to the setting up of insurance exchanges. The regulations governing the medical care ratio will lead to a decline in the company’s margins. Our $76 price estimate for UnitedHealth’s stock is in line with the current market price.

See Full Analysis For UnitedHealth Group Here

UnitedHealth’s Insurance Operations

UnitedHealth’s U.S. health insurance operations can be divided into three divisions: Employer and Individual insurance, Medicare and Retirement division and Medicaid Managed Care division. The three combined account for nearly 80% of the company’s revenues and EBITDA.

The Employer and Individual insurance division offers insurance plans for individuals and employers covering their employee’s insurance plans. The two categories of services offered by UnitedHealth are commercial risk-based insurance, which covers the risk associated with medical as well as administrative costs within the premiums received and commercial fee-based insurance which covers only administrative and managerial services. This division accounts for 35% of the company’s revenues and 38% of its EBITDA. There are around 190 million private health insurance enrollments in the U.S., of which 26 million are enrolled with UnitedHealth.

 

The Medicare and Retirement branch provides health care insurance plans to senior citizens and eligible younger people with disabilities, administered by the Centers for Medicare and Medicaid Services (CMS). The company provides coverage in return for a fixed monthly premium per member served from CMS. This division accounts for 30% of the company’s revenue and 32% of the EBITDA. UnitedHealth primarily uses the American Association of Retired Persons (AARP) as a distribution medium, offering a range of health insurance plans to the 37 million members of the association. There are around 50 million Medicare beneficiaries in the U.S. and UnitedHealth has a market share of over 20%.

Medicaid is a U.S. government program which provides healthcare for economically disadvantaged, medically underserved people and those without the benefit of employer benefit plans. UnitedHealth’s Medicare Managed division provides managed care solutions and insurance coverage to Medicaid beneficiaries. In return for the services and coverage provided, the insurer receives a monthly premium per member from the applicable state. UnitedHealth has a market share of around 10% of the 40 million Medicaid enrollments in the U.S. The company earns around 12% of its revenues and EBITDA from this division.

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Notes:
  1. FACT SHEET: The Affordable Care Act: Secure Health Coverage for the Middle Class, The White House, Office of The Press Secretary []
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  • commented 7 months ago
  • tags: UNH MET AIG HIG TRV
  • Nightmares For Nincompoops


    ( OBAMA-CARE 6 th in a series of unusual stories)



    Emilio Paletta Author



    Copy right 2009



    After completing my overnight shift at General, before heading home, I decided to climb up on a gurney and take a quick snooze. Once I dozed off, I began dreaming, about what things might be like now that Obama-care has been passed.



    When suddenly, off in the distance, I heard the clanging sound of a cow bell. As I opened my eyes, I could hardly believe what I saw. Strolling down the corridor was a farmer, dragging a real live, full fledged, moo-cow!




    Flabbergasted at what I was witnessing, I hopped off the stretcher and ran down the hall, fast as I could. "Sir I said, ' You can't bring your cow in here, this is a hospital!" Highly offended, the cow decided to take a flop. When it hit the floor it splattered all over the place; including me.



    In an attempt to control my emotions, I said, "Please sir, you must leave at once. That's when he began to explain, how he came to be there, in the first place.



    Offering his hand, he said "My names' Hairy Read, pleased to meet ya'. See ma'am, my Nancy's awfully sick and when I called the doctor, he told me to bring her to this here hospital, pronto! So here we is."



    "Has the doctor ever seen your Nancy before?



    "No ma'am!"



    "Did you explain that Nancy is a cow?"



    "Nope! ' and besides, he didn't ask, 'I just told him my Nancy's face got all screwed-up as she began turning green and that she had a terrible case of the trots!' That's when he said, 'Don't waist a minute, take her to the hospital."



    "But sir I said, 'this is a people's hospital, not for animals."



    "That don't matter no-mo, ma'am. Haven't you heard? Under Obamacare, the government is gonna give every last one of us health care." It's a new kinda "Sick Plan"; and the best part we don't have to pay a plug nickel fer it; they's gonna take the money from my old pappy and mammy." Besides, haven't ya herd, everybody's kickin' in an extra $63 bucks to pay fer pre-exsiten' conditions and my Nancy fits the bill, she gets the s--ts at lest once a month."



    I smiled, picked up the phone and called the attending physician to come stat to the ER. Then I called housekeeping and finally put the Hairy and Nancy into an examining room. In the meantime I left to take a quick shower and change.



    Just as I returned, the doctor was entering the new patient's room; before I had a chance to explain.



    Within seconds he came running out holding his nose. "Phew he said, 'Nurse, I think the patient must have expired, it smells like horse shit in there. To wit I said, "Right by-product, wrong animal." That's when I explained there was an old cow, called Nancy in there.'



    Checking to see for himself, he flicked on the light switch.





    To his surprise he said, "I thought you were kidding."



    "What are we supposed to do doctor, I said?"



    "There is not much we can do he said, 'we're obligated to treat the patient, 'cause if we don't, we could be brought up on charges of discrimination; for turning the old cow away!"



    "Not according to the new guidelines I said, 'under Obama-care if the patient is over the hill, they should be put out to pasture, 'cause we're not allowed to do unnecessary testing, that will drive up health care costs.'



    "It's a shame he said, ' those in Congress that voted for this bill should have been made to take the "Hippocratic Oath", before doing so"



    "Oh, but they have I said, 'only their's is called the "Hypo-critic Oath". They don't abide by the old rule of, 'What's Good for the Goose is Good for the Gander," they're exempt. In the meantime doctor, how much Imodium-D are you going to prescribe for this 1600 lb cow?" "About the same amount I'd like to give those idiot's in Congress that voted for Obama-care, he said emphatically!"



    "While I ponder that thought I said, 'I'll call housekeeping, and see what's keeping them.



    As I reached for the phone, I tumbled off the gurney; only then realizing I had just experienced a horrific nightmare; which I'm afraid has come to fruition.