United up, others down in HMO earnings

Increases in market share and growth in its third-party administrative business account for UnitedHealth Group's high earnings, say analysts.

By Bob Cook, amednews staff. Aug. 21, 2000.

As other health plans report falling earnings, UnitedHealth Group is reporting huge growth in its profits.

United, the nation's No. 2 health insurer behind Aetna, on Aug. 4 reported net earnings of $170 million, or $1.01 per share, for the second quarter -- a 26% increase over the same period in 1999. Revenues were up 7%, to $5.22 billion from $4.86 billion.

Analysts said United benefited from increased market share and growth in its third-party administrative business, in which United administers health benefits for self-insured companies.

United also has not suffered, as other plans have, from higher-than-expected medical costs. United's medical-loss ratio, a measurement of premium revenues collected vs. medical costs, was 85.4%, down from 85.7% in the year-earlier quarter.

United has cut costs in part by pulling out of less profitable areas such as Medicare and the states of Washington, Oregon and California, where its market share was low.

Aetna and Humana reported declining profits because of higher-than-expected medical costs. However, both companies were profitable in the second quarter of 2000.

Aetna on Aug. 3 reported earnings of $134 million, or 94 cents per share, down 16.7% from the second quarter 1999 total of $160.9 million, or $1.03 per share. Analysts had expected $1.20 per share earnings from Aetna, but the company warned on July 18 that its earnings would likely be between 85 and 95 cents per share.

Aetna's revenue in the second quarter 2000 actually went up 37% to $8.1 billion, thanks to business gained in its acquisition of Prudential Insurance Co.'s health business.

Humana on Aug. 3 reported its second quarter 2000 earnings fell 32% from the comparable period in 1999, to $19 million, or 11 cents per share, from $28 million, or 17 cents per share. Revenue increased 8% to $2.7 billion, mainly because of premium increases, the company said. Those increases also caused membership to drop 4%, the company said.

Humana also reported that its medical costs were going up. The company is pulling out of some Medicare and Medicaid markets and dropping some small-employer group coverage in an attempt to control costs.