Yesterday’s 24/7WallSt article about UnitedHealth said that an “earnings warning” issued by the corporation “could be a serious blow to at least part of ACA/Obamacare.”
UnitedHealth’s latest advice to investors is that the corporation now expects slightly lower 2015 profits. (Can’t help noticing: that recalculation includes a write-off of “$275 million related to the advance recognition of 2016 losses.” Nevermind that we haven’t actually gotten to 2016 yet; UnitedHealth is already calculating losses.)
Apparently, that press release was worth the headline “UnitedHealth Warning Creates Huge Spillover, With Big Implications Ahead.”
Just a month ago, 27/7WallSt was writing happier news about UnitedHealth. Quarterly earnings per share were better than expected, and better than 2014. Premiums were up 9.87% over last year. The company was adding about 100,000 new subscribers a month (1.7 million new people a year). And for the first three quarters of 2015, things were so rosy that UnitedHealth spent $1.1 billion buying back its own stock.
Plus, UnitedHealth paid out another $1.3 billion to shareholders in dividends, just in the first three quarters of 2015.
So… $2.4 billion paid out to shareholders in the first nine months of this year… and now suddenly there’s supposed to be some sort of crisis? Wow.
Back to 24/7WallSt: “What has been interesting to see here is that UnitedHealth actually has seen its shares soar under ACA/Obamacare.” Yes, that’s what happened. The Affordable Care Act passed in 2010. Here’s what UnitedHealth’s stock price history looks like:
Looks like UnitedHealth’s profits are up since Obamacare, too. Here’s what their quarterly earnings-per-share history looks like:Am I the only one having a hard time seeing how this is a problem for UnitedHealth?
Back to 24/7WallSt. The headline from last month’s article: Are UnitedHealth Earnings Enough for Investors?
Hmmn. Is investor greed the real crisis for Obamacare?
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Yep, there’s more.
As of yesterday, the corporation’s new profit expectations “reflect a continuing deterioration in individual exchange-compliant product performance.” Yep, they’re talking about policies sold to individuals through ACA exchanges, which apparently are not “performing” very well. From the press release: “UnitedHealthcare has pulled back on its marketing efforts for individual exchange products in 2016. The Company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017.”
In other words: individual policies aren’t “performing” very well, from the corporation’s perspective. So UnitedHealthcare may stop selling them.
UnitedHealth is currently the largest health insurance provider in America. Other large health insurance providers – Anthem and Cigna, Humana and Aetna – have plans to merge, which “could shrink the number of major companies in the health insurance industry from five to just three. And that could mean fewer options and higher rates for consumers and the employers that provide health insurance.”
And according to yesterday’s 24/7WallSt article, UnitedHealth’s (newest) earnings forecast “could be used by the companies to support those pending health insurance mergers.” Apparently on the theory that the four other insurers are too small to compete in the individual policy “product segment.” (Even though Centene Corp. and Kaiser Permanente seem to be doing just fine.)
Am I the only one wondering why UnitedHealth’s latest earnings warning would justify the mergers of its largest competitors? Given the corporation’s “soaring” stock price. Given the corporation’s growth in earnings-per-share. Given the fact that the UnitedHealth paid out $2.4 billion to shareholders just in the first nine months of this year…?
Am I the only who remembers that Obamacare was intended to rein in profiteering by insurance companies?
Remember what it was like, back then? “In the midst of a deep economic recession, America’s health insurance companies increased their profits by 56 percent in 2009, a year that saw 2.7 million people lose their private coverage. The nation’s five largest for-profit insurers closed 2009 with a combined profit of $12.2 billion.”
So, yeah, I suppose someone could “blame” Obamacare for UnitedHealth’s current financial situation. And the fact that UnitedHealth’s per-share profit (EPS) is 75% higher now than it was in 2009.
But if anybody’s going to start passing blame around, now that “the 2016 presidential election has brought the health care argument up more times than can easily be counted”…
I think we should also be talking about whether Obamacare managed to stop the corporate profiteering, like it was supposed to.
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Can’t help noticing…
Yesterday’s headlines were fueled by the sudden drop in UnitedHealth’s stock price, which followed its revised earnings statement.
But that was yesterday. So far today, the stock price has recovered more than half of yesterday’s decline.
Which still leaves the stock trading at about four times its price in 2009.
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Read more NHLN coverage of stock buybacks here.