Managed care companies show strong third quarter

Plans exited unprofitable markets and boosted premiums to improve financial results, but CEOs warn of rising medical costs.

By Julie A. Jacob, AMNews staff. Dec. 3, 2001.

With the notable exception of Aetna Inc., which lost $49.3 million, the managed care industry had a financially healthy third quarter. The companies' leaders credited that to premium increases and exits from unprofitable markets.

Median earnings for the managed care industry overall grew 25% over second-quarter earnings, according to a Merrill Lynch review of the managed care industry's third-quarter financial results.

The Merrill Lynch report attributed the growth in earnings to premium increases, changes in the companies' business lines, debt reduction and share repurchases.

However, the report warned that rising costs, especially for prescription drugs and outpatient care, will be an "important fundamental challenge" to the profitability of managed care plans.

UnitedHealth Group earned a third-quarter profit of $396 million, a 28% increase over its third-quarter 2000 earnings of $309 million. Revenue was up 9.3%, to $5.9 billion from $5.4 billion.

In a news release announcing United's third-quarter results, CEO William W. McGuire, MD, attributed the earnings growth to increased productivity due to the use of technology, as well as a shift toward fee-for-service reimbursement.

Cigna Corp.'s health care, life and disability benefits division posted third-quarter operating earnings of $209 million, a 5% increase over last year's third-quarter results of $200 million. Revenue for health care operations was not broken out.

Humana Inc., earned a third-quarter profit of $30 million, a 30% increase over its third-quarter 2000 earnings of $23 million. Revenue stayed flat at $2.6 billion. [...]