The financial drag from the federal health care overhaul should lessen in the coming years, as growth continues in the Medicare and Medicaid markets, Stephen Hemsley, the chief executive at UnitedHealth Group, said during a Tuesday investors conference in New York City.
The nation’s largest health insurer expects earnings per share in 2015 between $6 and $6.25, the company forecast Tuesday, saying the projected results include a hit of between 7 percent and 9 percent due to the federal Affordable Care Act. The health law includes taxes on insurers and payment cuts for Medicare health plans.
The impact on earnings at UnitedHealth Group this year is about 18 percent, but Hemsley told investors that the health law changes are starting to settle in as the “new normal.”
UnitedHealth Group expects to grow its Medicare business with operating improvements such as earning top quality rankings for its health plans across the country. Medicaid growth should come, Hemsley said, with the expansion of eligibility for the government program under the federal health law.
“The head winds we face looking into 2015 and beyond diminish significantly, and are more muted, than in recent memory,” Hemsley said.
Minnetonka-based UnitedHealth Group employs about 13,800 people in Minnesota. The company sells supplemental insurance policies to Medicare beneficiaries, as well as health plans that manage the medical and pharmacy benefits for people covered by the government program.
Medicaid provides health insurance to low-income Americans, and states hire UnitedHealth to manage benefits for beneficiaries. The company’s Medicaid membership has grown by nearly 1 million people this year.
The largest source of revenue at UnitedHealth Group is the company’s insurance division, called UnitedHealthcare. The company also expects growth from its Optum division for health services, such as pharmacy benefit management and information technology.
As part of Optum, UnitedHealth operates the largest health insurer and hospital operator in Brazil. In October, company officials said they are eyeing other growth prospects in Central and South America. In his comments Tuesday, Hemsley cited “significant international opportunities for Optum as global governments respond to their own national budget and health care system pressures.”
The insurer on Tuesday affirmed its previous outlook for 2014 net earnings of $5.60 to $5.65 per share. In 2015, the company expects revenue of $140.5 billion to $141.5 billion — slightly higher than expected by stock analysts.
If the company hits the top end of the earnings guidance for next year, UnitedHealth would see double-digit growth rate compared with 2014, Hemsley said. He added: “For 2016, given our momentum and the diminishing effects of the (federal health law), I would be disappointed if we were not solidly above that 2015 pace.”
UnitedHealth Group shares were up 60 cents in afternoon trading, to $99.66, after briefly reaching $100 earlier in the day.