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UnitedHealth 3Q profit rises, enrollment falls

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Managed care company UnitedHealth Group Inc. saw its third-quarter profit jump 13 percent, as growth in several businesses helped balance another enrollment decline and fight off a touch of swine flu.

The Minnetonka, Minn.-based insurer said Tuesday it also saw revenue rise 8 percent, with enrollment in its Medicare Advantage and Medicaid plans growing about 20 percent each.

But UnitedHealth saw enrollment in its higher-margin plans sold to employers fall by 6 percent to 24.8 million compared to the same quarter last year. That follows a 6 percent decline in the second quarter. Attrition in these plans has been a problem for several insurers during the recession as companies cut jobs and reduce the number of covered workers.

UnitedHealth’s commercial enrollment also fell 6 percent in the second quarter.

CEO Stephen J. Hemsley told analysts Tuesday morning the insurer expects those enrollment losses to improve in the fourth quarter and slow “meaningfully” next year compared to 2009.

“Unemployment continues to rise, and the debate over additional stimulus spending suggests the government’s concerned that renewed economic strength is not imminent,” he said.

The insurer spent $60 million on swine flu related costs in the third quarter, up from $50 million the quarter before. Company executives said they expect flu spending to continue to rise and could be a “significant factor” in the fourth quarter.

UnitedHealth said it earned $1.04 billion, or 89 cents per share, in the quarter ended in September, compared with $920 million, or 75 cents per share, a year ago. Analysts expected 76 cents per share, according to Thomson Reuters.

Revenue rose to $21.7 billion, ahead of Wall Street’s estimate of $21.56 billion.

Revenue for Ovations, which provides health and wellness services to people over 50, rose 19 percent to $7.9 billion.

The company also reported a $190 million benefit in the quarter due to lower-than-expected medical costs leftover from the first half of this year and 2008.

“That’s a significant amount for them,” Edward Jones analyst Steve Shubitz said. “That really helped the outperformance.”

Unlike commercial enrollment, total public and senior enrollment — which includes Medicaid, Medicare Advantage and Medicare supplement business — rose to 7.2 million from 6.3 million.

The company also is still seeing an increase in the number of people who chose to continue their employer-based health insurance under the federal law known as COBRA after they leave their jobs.

Federal subsidies started earlier this year help pay a portion of the cost of COBRA coverage, which normally represents a huge price hike from what someone would pay while employed.

COBRA-based coverage made up 1.5 percent of UnitedHealth’s total enrollment at the start of the year, but that has climbed past 2 percent and contributed to rising medical costs, company officials said.

For the full year, UnitedHealth said it expects to earn $3.15 per share, at the high end of its previous guidance. Analysts expect $3.09 per share, on average.

Company shares rose nearly 6 percent, or $1.46, to $26.38 in late morning trading Tuesday.

UnitedHealth is seen by many analysts as a bellwether for the managed care sector. It is the largest U.S. health insurer by revenue, and the first to report earnings each quarter.

AP Business Writer Marley Seaman in New York contributed to this report.

© 2009 Associated Press. Displayed by permission. All rights reserved.

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