The Wall Street Journal-20080123-United Health Results Fuel Worry As Crucial Cost Measure Weakens
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United Health Results Fuel Worry As Crucial Cost Measure Weakens
UnitedHealth Group Inc. posted a 3.5% fourth-quarter profit increase that was in line with Wall Street's expectations, but concerns about a key measure of medical costs in the health-insurance giant's crucial commercial health-plan business weighed on its shares.
Weakness in UnitedHealth's business of insuring, rather than just administering, employer health plans offset improved profit in the health insurer's Medicare and Medicaid business. The percentage of premium revenue that UnitedHealth used to pay patient bills for commercial accounts came in higher than some on Wall Street anticipated, and its commercial risk margins continued to erode.
UnitedHealth shares fell $3.18, or 5.9%, to $51.22 in 4 p.m. composite trading on the New York Stock Exchange, leading a selloff in major health-insurance stocks as broader market indexes declined amid economic concerns.
The Minnetonka, Minn., company reaffirmed its earnings outlook for this year of $3.95 to $4 a share, an increase of 13% to 14% from last year's adjusted results.
UnitedHealth provided health insurance to more than 31 million people as of year's end, up from nearly 30.9 million a year earlier. Commercial enrollment, including both fully insured and fee-based accounts, declined from a year earlier, while enrollment in the senior and government business grew over the same time.
Chief Executive Stephen Hemsley said on a conference call that UnitedHealth continues to match premium pricing to medical-cost growth in its UnitedHealthcare accounts and expects a stable full-year medical cost ratio of about 82%.
Meanwhile, Mr. Hemsley said UnitedHealth has made improvements in customer service, a problem area the contributed to the loss of commercial enrollment last year.
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Vanessa Fuhrmans contributed to this article.
