UnitedHealth Group raises forecast as profit beats estimates

NEW YORK – UnitedHealth Group Inc., the biggest U.S. health insurer by sales, raised its profit forecast after quarterly earnings beat analyst estimates as more people signed up for Medicaid services under Obamacare.

Profit for the year is now expected to be $5.60 to $5.65 a share, the Minnetonka, Minnesota-based company said today in a statement. The company’s previous forecast was for $5.50 to $5.60. Third-quarter earnings were $1.63 a share, topping by 10 cents the average estimate of 23 analysts surveyed by Bloomberg.

UnitedHealth’s results were boosted from an expansion of Medicaid under the Patient Protection and Affordable Care Act, which expanded the program. The company added 250,000 people to its Medicaid services in the quarter, and has gained a total of 885,000 customers under the program through the first nine months of the year.

“Medicaid is a huge driver of growth,” said Ana Gupte, an analyst at Leerink Swann & Co., in a telephone interview. “They’re bringing more uninsured people. United is a leading Medicare service provider and clearly benefiting from the tailwind.”

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U.S. health insurers have been adapting to the 2010 law that this year required all Americans to buy insurance, giving those with low incomes subsidies to help them do so. In return, insurers have to cover more preventive care services, agree not to turn away people with preexisting conditions and limit what patients pay out of pocket.

Shares down

UnitedHealth declined less than 1 percent to $81.75 at 7:54 a.m. New York time.

Gupte speculated that the shares may be down because HCA Holdings Co., the biggest for-profit U.S. hospital chain by patient volume, yesterday said hospital admissions rose in the third quarter. More admissions may mean more costs for insurance companies in the future, she said.

Net income for the third quarter rose to $1.6 billion from $1.57 billion a year earlier, the company said.

Revenue rose 7 percent to $32.8 billion, led by the company’s public and senior business, with revenue from its community and state plans jumping 34 percent to $6.13 billion. UnitedHealth saw a decrease in revenue from its U.S. commercial division, which provides coverage to individuals and employers, after losing 30,000 customers on employer-sponsored plans.

UnitedHealth is the first of the major U.S. health insurers to report third-quarter results.

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