UnitedHealth Group Inc. on Tuesday said it anticipated another $200 million more in losses this year on the individual insurance business created under U.S. President Barack Obama's national healthcare reform law, citing the program's high medical costs.
The largest U.S. health insurer said the problem was confined to this one business line, which it plans to exit in 2017 for the most part.
This was the third quarter in a row when UnitedHealth has booked anticipated losses for the program known as Obamacare. In April, it said it expected $650 million in losses on the program this year.
The company said its other businesses, including pharmacy benefit management, and technology and consulting divisions, were strong, and it reported higher-than-expected earnings and revenue for the second quarter.
UnitedHealth also raised the low end of its full-year profit outlook to $7.80 per share from $7.75 while keeping the high end at $7.95.
The company's shares were down 5 cents at $140.70 in premarket trading.
UnitedHealth which also sells employer-based insurance as well as Medicare and Medicaid, is the only large insurer not involved in any of the major consolidation deals under review by antitrust regulators.
Revenue from the company's Optum business, which manages drug benefits and offers healthcare data analytics services, rose 51.5 percent to $20.6 billion from a year earlier.
The plans created under Obamacare, which is formally called the Affordable Care Act, brought UnitedHealth's operating margin down by 90 basis points from last year.
"We believe ACA headwinds could be greater" for the company in 2016, Susquehanna Financial Group analyst Chris Rigg wrote in a research note.
The $200 million in losses equates to about 12 cents per share, Rigg said.
Net earnings attributable to company's shareholders rose to $1.75 billion, or $1.81 per share, from $1.59 billion, or $1.64 per share, a year earlier.
UnitedHealth's total medical care ratio, the percentage of premiums an insurer spends on claims and improving healthcare quality, rose by 30 basis points to 82 percent because of the Obamacare plans.
"Overall, medical cost trends remain well-controlled and consistent," the company said in a news release.
Excluding amortization for acquisitions and the related tax effects, earnings of $1.96 per share exceeded the analysts' average estimate of $1.89, according to Thomson Reuters I/B/E/S.
Revenue rose about 28 percent to $46.49 billion. Analysts were expecting $45.04 billion.
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