A 3 percent rise in profit, thanks in part to fewer big claims, beat Wall Street estimates.
Price-sensitive Americans are avoiding the hospital and going to urgent care instead, and it's continuing to help insurance companies such as UnitedHealth Group Inc.
On Thursday, the Minnetonka-based company reported a 3 percent increase in first-quarter earnings on 7 percent revenue growth, exceeding Wall Street estimates.
The largest publicly traded health insurer reported first-quarter net earnings of $1.39 billion, or $1.31 per share, on revenue of $27.28 billion. The Wall Street consensus estimate had been $1.16 per share on revenue of about $27 billion.
Analysts say the results reflect flat use of inpatient services, such as surgical procedures and hospital stays, that is offset by a modest rise in consumers' use of outpatient health services, such as urgent care. High insurance copayments and deductibles are considered the main reasons consumers are avoiding inpatient treatments.
"People are still looking at their jobs, their incomes and their wealth, and they're being very cautious about how they spend their health care dollars," said Sheryl Skolnick, an analyst who follows UnitedHealth for CRT Capital Group in Stamford, Conn. "If a doctor gives them the choice of a fix or a painkiller, they're taking the painkiller."
That's good for UnitedHealth and its competitors, because paying out fewer big medical claims helps boost earnings per share, Skolnick said. If consumer reluctance to spend on health care continues, "it suggests that health plans should have a good year this year."
That's particularly true for UnitedHealth, because outpatient health claims are a relatively small cost category for the company, said Sarah James, an analyst with Wedbush Securities in Los Angeles. "The big category for UnitedHealth is inpatient costs, which is still flat to declining."
"Consumers are going to put off major health care items in 2012," James said. "It will be 2013 or 2014 before wider health care use by consumers comes back."
The company's stock closed at $58.71 per share Thursday, up $1.39 or less than 3 percent.
Some analysts say investors are more focused right now on the Supreme Court's pending ruling on the government's health care overhaul law than on the results of individual health care companies.
The Supreme Court is to rule by June on the law passed in 2010 that would cover millions of uninsured people. Some investors are worried that the Supreme Court could strike down the law's requirement that everyone sign up for insurance or pay a penalty, but uphold another requirement that insurers cover everyone who applies.
"Investors are mostly concerned about the Supreme Court decision," James said. "I'm not as concerned about it, because I've looked at similar markets where profit margins were not that affected."
UnitedHealth said Thursday that it now expects 2012 net earnings to range between $4.80 and $4.95 per share, up from its previous forecast of earnings between $4.60 and $4.80 per share.
Its 2012 revenue projection remains unchanged at $109 billion to $110 billion.
Steve Alexander 612-673-4553