Health plan earnings up, but United's woes continue

Premium growth and Medicare Part D help boost the biggest insurers. But United HealthGroup warns scrutiny over its stock-option practices is far from over.

By Bob Cook, AMNews staff. Feb. 26, 2007.

United it stands, but it's bracing for a fall.

United HealthGroup, like its brethren among the nation's biggest health plans, announced robust revenue and earnings growth in 2006. But unlike the other plans, United is warning investors that investigations into its past stock-option-granting practices could hit the company hard.

The Minnetonka, Minn.-based company reported $71.7 billion in revenues for 2006, with profits of $4.2 billion, above company expectations. Like other big plans, revenues were helped by involvement in the Medicare Part D prescription plan as well as Medicare Advantage plans.

Humana was the biggest beneficiary. Its revenues jumped 50% for the year, to $21.6 billion from 2005's $14.4 billion. Its earnings per share increased 62%, to $2.90 from 2005's $1.79. WellPoint and Aetna also reported increased profits and revenues; Cigna reported increased profits, though revenues on paper went down slightly because of extra money Cigna received last year from selling parts of its business.

However, just about every plan reported a higher medical-cost ratio -- on average, up about 2% to just more than 80% -- because of the Medicare plans. Medical-cost ratio refers to the amount of money health plans spend on care compared with the amount of revenue collected.

Still, most plans in their fourth-quarter 2006 earnings reports crowed about their company's successful years. Except United.

While the company expressed happiness over its earnings and revenues, United tempered that joy with the reality that multiple investigations for its stock-option practices are under way.