UnitedHealth Group Inc., the largest insurer in the state of Colorado, said Tuesday its second-quarter earnings rose 13 percent, as enrollment gains helped fuel revenue growth and consumers continued to moderate their health care system use.
The Minnetonka, Minn., insurer also hiked its 2011 profit forecast by 20 cents per share after raising it in the first quarter as well.
UnitedHealth’s enrollment grew 5 percent to 34.2 million compared to last year’s second quarter, led by gains in commercial coverage, which includes employer-sponsored and individual plans. That contributed to an 8 percent jump in revenue from UnitedHealthcare, the company’s largest segment.
Revenue also swelled 19 percent to $7 billion for UnitedHealth’s Optum segment, which offers health management, consulting and pharmacy services.
Health care use has climbed at a slower rate than insurers expected when they set premiums, and that trend has helped the managed care sector in recent quarters. UnitedHealth said Tuesday it continues to see a benefit, but that may change.
“We expect a return toward somewhat more normal utilization trends in the second half of this year and into 2012,” CEO Stephen J. Hemsley told analysts during a conference call.
However, analysts expect the trend to continue. They say the slumping economy has helped rein in use, and health plans that make patients more aware of the cost of care also may be having an impact.
UnitedHealth earned $1.27 billion, or $1.16 per share, in the three months that ended June 30. That’s up from $1.12 billion, or 99 cents per share, in the same quarter last year. Revenue rose 8 percent to $25.23 billion.
Analysts surveyed by FactSet forecast earnings of 91 cents per share on $25.22 billion in revenue. Some analysts included in their estimates a charge that UnitedHealth said Tuesday it may take later this year, not in the second quarter.
The insurer saw a $180 million gain in the quarter because claims left over from prior quarters came in lower than expected. UnitedHealth said that, plus the moderated health care use, helped offset estimated rebates it will have to pay under a health care overhaul rule that started this year.
The overhaul requires insurers to spend a minimum percentage of their premiums on medical claims and quality improvements or issue rebates to consumers. The goal behind the law is to ensure that a fair share of the premiums an insurer collects goes toward care. Its impact on the sector has been muted so far.
UnitedHealth now expects 2011 earnings of $4.15 to $4.25 per share, up from its forecast in April for earnings of $3.95 to $4.05 per share. It expects $101 billion in revenue.
Analysts forecast earnings of $4.21 per share on $101.49 billion in revenue.
UnitedHealth shares fell nearly 3 percent, or $1.45 to $50.50 in Tuesday morning trading. Analyst Les Funtleyder said Wall Street expected a good quarter, and the share slip shouldn’t cause alarm since the price has already climbed more than 40 percent this year.
“It was a good quarter, it looks like the rest of the year is going to be good for them,” said Funtleyder, health care portfolio manager for Miller Tabak.
UnitedHealth is the largest publicly traded health insurer based on total revenue and the second-largest based on enrollment, trailing only WellPoint Inc. It is the first to report earnings every quarter, and Goldman Sachs analyst Matthew Borsch said in a note the results bode well for the rest of the sector.
WellPoint and Aetna Inc. will report their second-quarter numbers July 27. Humana Inc. follows on Aug. 1, and Cigna Corp. rounds out the largest health insurers when it reports earnings Aug. 4.