UnitedHealth Group: How Did The UnitedHealthCare Division Perform In 2016?

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UnitedHealth Group (NYSE:UNH), the largest health insurer in the U.S., operates two primary businesses – UnitedHealthCare and Optum. UnitedHealthCare includes the company’s private health insurance, Medicaid and Medicare segments, while the Optum division covers services such as pharmacy benefits management (PBM) and health care services. (Read how Optum performed in 2016 here)

UnitedHealth’s strategy to provide integrated health care solutions seems to be unfolding well, and the company achieved both its top line and bottom line guidance last year. Below we discuss UnitedHealthCare’s performance in 2016 and trends to watch going forward.

UnitedHealthCare Sub-Divisionsunh-33

The UnitedHealthCare division posted revenues of $148.6 billion in 2016, an increase of 13% y-o-y. This was driven by a 12-14% increase in sales across business segments, including Medicaid, Medicare and the international business. In terms of the bottom line, the division’s operating income grew over 13% to $7.7 billion and operating margin was stable at around 5.2%. The table below provides a breakdown of the division’s results in the past five quarters.
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Private Health Insurance Sustains Momentum

The private employer and individual health insurance business has been improving since Q2 2015 in terms of both revenue and customers served. In Q4 2016, the division’s revenue grew about 12% year-over-year (y-o-y) to $13.5 billion and the company’s customer base marginally increased over the previous quarter to 30.6 million. Interestingly, the business’ revenue per subscriber grew both quarter-over-quarter and year-over-year to over $441 in Q4 2016. This will be a key metric to focus on in the division going forward.

Medicare And Medicaid  Remain Strong, Affordable Care Act In Focus

In the twelve months ending December 2016, over 600,000 additional seniors opted for UnitedHealthCare’s Medicare Advantage and Medicare Supplement products, increasing the customers served in the company’s Medicare and Retirement division to 7.9 million. In Q4 2016, the segment’s revenues increased 16% y-o-y to $14 billion driven by a 7% increase in revenue generated per customer to $1,779.

In the Medicaid program, the company currently serves 5.9 million people, up from 5.3 million an year ago. This growth was largely driven by the Affordable Care Act (ACA). With Donald Trump taking over the U.S. Presidency, there are some concerns with respect to the future of Medicaid, and the ACA as a whole. The Medicaid program covers nearly 77 million Americans, of which about 12 million were added under the ACA. Although the President-elect has hinted at continuing some components of the healthcare program, we will have to wait and see how this turns out. [1]


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Notes:
  1. Expect Medicaid to Change, but Not Shrivel, Under Donald Trump, The NY Times, Nov 15 2016 []