Government-run health insurance exchanges became an even bigger source of financial losses during the second quarter at Minnetonka-based UnitedHealth Group.

The nation's largest health insurer said Tuesday that it saw higher medical costs once again on the exchange marketplaces, and increased projected losses for the year by $200 million.

UnitedHealth already had expected to lose $650 million on the business, where the insurer currently sells health plans to individuals and families through exchanges in 34 states.

The online markets were launched under the federal Affordable Care Act, and UnitedHealth announced a major pullback earlier this year.

"That effort is on track — and we do not expect any meaningful financial exposure on 2017 business from the three or fewer exchange markets where we currently plan to remain," said Stephen Hemsley, the UnitedHealth Group chief executive, during a call with investors on Tuesday.

The exchange market is a very small part of UnitedHealth, and company officials stressed on Tuesday that the second quarter included growth in almost all other lines of business.

Overall, UnitedHealth saw its profit jump during the second quarter to $1.76 billion, up 11 percent from $1.59 billion a year ago. Adjusted earnings per share came in at $1.96, well above analysts' projections of $1.89 per share, and the company increased the low end of its earnings guidance for the rest of the year.

The company posted fast growth within its Optum division, which includes pharmaceutical benefit management (PBM) services that are purchased by other health insurers. PBMs negotiate prices with drug companies, create pharmacy networks and structure what patients must pay out of pocket for different medications.

Optum's PBM business recently has won three large contracts from rival CVS totaling $2.3 billion in annual drug spending, wrote Peter Costa, an analyst with Wells Fargo Securities, in a note to investors. The business grew significantly during the second half of 2015 with the acquisition of Illinois-based Catamaran Corp.

"This suggests to us that OptumRx is becoming a stronger competitor," Costa wrote.

43.9 million insured

As of June 30, the company's UnitedHealthcare insurance division provided coverage to about 43.9 million people in the U.S., up from about 41.8 million at the same point during 2015. The company saw growth as a vendor to the Medicare and Medicaid government health insurance programs, while health care cost trends for those with commercial coverage remained under control, said Dave Wichmann, the UnitedHealth Group president.

Overall, second-quarter revenue of $46.5 billion was up 28 percent compared with the year-ago quarter, due in part to the larger PBM business.

On the exchanges, a growing number of health insurers have reported losses due to surprisingly high medical costs. No national insurer has announced as broad a pullback, however, as UnitedHealth Group.

The company has never sold on Minnesota's MNsure exchange, but Eagan-based Blue Cross and Blue Shield of Minnesota announced last month that it will pull many products from the individual market, including MNsure. Blue Cross says it will continue to sell to individuals and families HMO products that include smaller networks of doctors and hospitals.

At UnitedHealth Group, about one-third of the additional exchange losses during the second quarter stemmed from a higher volume of customers, said Dan Schumacher, the chief financial officer at UnitedHealthcare, the company's health benefits business. UnitedHealthcare expected there would be greater attrition during the quarter, Schumacher said, and fewer new customers.

Instead, UnitedHealthcare had about 820,000 people in exchange products at the end of the second quarter, up about 25,000 people from the end of the first quarter.

High use of care

The bigger driver of losses in the quarter was high use of medical care.

"The reality is the severity of chronic conditions inside the population actually increased on a year-over-year basis," Schumacher said. "If you look at the prevalence of chronic disease, things like HIV and hepatitis C, diabetes, COPD, those are examples of things where the prevalence was high to begin with in 2015, and that has increased into 2016."

Tuesday's earnings release was the latest of several public messages from United on the troubled financial health of the exchange business.

In late 2015, the insurer said it saw too many instances of individuals buying policies, obtaining costly care and then dropping coverage. In the wake of such comments from United and other insurers, the federal government tightened some rules about who can buy coverage during "special enrollment periods" that occur outside the typical open enrollment cycle.

Last month, United sued a dialysis clinic operator, suggesting that money through a nonprofit was wrongly steering kidney disease patients from Medicaid health plans into United's policies for individuals and families.

The company also has cited as a problem the lack of growth in the exchange markets. The negative commentary has contrasted with messages from some other health insurers that have posted profits on the exchanges, or announced plans for growth.

UnitedHealth Group employs more than 200,000 people worldwide, including about 14,000 in the Twin Cities. On Wednesday, the company's stock closed at $142.59, up a little more than 1 percent for the day.

Twitter: @chrissnowbeck