UnitedHealth, considered the nation's largest insurance company, suffered a 19% drop in their fourth-quarter profit last year 2015. The company said one of the factors that gave them a financial hit is the Obamacare insurance exchanges. Despite this financial hit, however, UnitedHealth still exceeded the analysts' expectations.
UnitedHealth posted their fourth-quarter earnings early this week. The company ended the fourth quarter with $1.22 billion as compared to their $1.51 billion in the same quarter of the previous year. Total revenue in the fourth quarter hit $43.6 billion, up 30% from the previous year's fourth quarter.
"Optum is a powerful engine for UnitedHealth," says Dan Mendelson, president of Avalere Health, a Washington, D.C.-based health care consulting firm. "Optum is a diverse set of businesses," and pharmacy benefit management and health care analytics are generally doing well across the health care marketplace.
Providing health insurance is UnitedHealth Group's core business. However, the Obamacare has become a challenge for them, causing them financial difficulties. The company had earlier announced that it may pull out of the exchanges after 2016, forcing more than half a million people to find other coverage.
"Surely the very first people are the sickest. They want (the coverage) more than others," says Gary Claxton, vice president of the Kaiser Family Foundation.
The report for the full-year 2015 earnings from operations for UnitedHealthcare were reflected as $6.8 billion. It fell $238 million from the previous year, "driven by $720 million in losses related to individual exchange-compliant insurance business."
However, Mendelson stays positive, saying that last year's losses doesn't necessarily mean that trend for other insurance companies is the same. He said that companies differ widely. UnitedHealth Group "got into the exchange market late," he says, noting that other companies are more experienced when it comes to situations like this.
Claxton agrees, saying "some companies lost money in 2015 and others didn't."
To end, UnitedHealth Group's adjusted earnings per share were $1.40, a few cents higher than estimates from Zacks Investment Research and other analysts. The company reported full-year adjusted net earnings of $6.45 per share.
