UnitedHealth Group (NYSE: UNH) is the parent company of various other health services organizations and health insurers. With $94.2 billion in revenue in 2010, UNH is the second-largest publicly traded health insurance company in the United States. As such, it has significant scale advantages that extend across its major product lines, allowing it to attract new member hospitals as well as negotiate for lower prices.
The company generates 90% of its revenues through three health insurance organizations: one for private clients, one for Medicare recipients, and one for Medicaid beneficiaries. The government-sponsored clients represent an important source of business for UNH, so the current national health care debate could heavily impact United's operations. United has a number of other products and services, the most significant of which is its Ingenix, a data gathering and analysis division. United uses the data to evaluate the effectiveness of its doctors and hospitals; the company also sells the information to other health industry professionals.
With the Patient Protection and Affordable Care Act, the much awaited and much debated health reform law, several of its provisions will affect UnitedHealth and other insurers. The overall effect, however, remains to be seen.
The law includes a large number of health-related provisions to take effect over the next four years, including expanding Medicaid eligibility, subsidizing insurance premiums, providing incentives for businesses to provide health care benefits, prohibiting denial of coverage/claims based on pre-existing conditions, establishing health insurance exchanges, and support for medical research. The costs of these provisions are offset by a variety of taxes, fees, and cost-saving measures, such as new Medicare taxes for high-income brackets, taxes on indoor tanning, cuts to the Medicare Advantage program in favor of traditional Medicare, and fees on medical devices and pharmaceutical companies; there is also a tax penalty for citizens who do not obtain health insurance (unless they are exempt due to low income or other reasons).
The expansion of Medicaid together with the health insurance mandate and premium subsidies are projected expand insurance to 32 million Americans without coverage. United stands to benefit from this, as the one of the largest insurers as well as the largest government contractor for administering Medicaid (UNH’s AmeriChoice program brings in $6 billion annually).
The law ends will end the practices of refusing to cover patients with pre-existing conditions. This will likely lead to an increase in premium costs; however, given that the rule applies across the board, it may not hurt insurers’ competitive positioning.
Cuts to Medicare Advantage program reimbursements may hurt UNH, with its roughly 2.0 million MA enrollees, in the short term. In the long term, UNH may lose out still more: as MA beneficiary premiums increase to reflect lower government reimbursements, Medicare patients may migrate to less profitable Prescription Drug Plans and opt to receive their medical benefits from the traditional government-run Medicare program.
The health care law will also effectively begin to cap insurance company profits in 2011. Insurers will be required to spend 85% of large-group and 80% of small-group plan premiums on medical costs, or else improve health-care quality or return the difference to customers in the form of a rebate. Under the new law, such a performance will not be possible again in 2011. Moreover, the strong performance has analysts worried that UNH will draw unwanted political attention amid continuing negative political sentiment directed at insurers. However, insurer Wellpoint reportedly reclassified certain administrative expenses--$500 million dollars worth--in a way that increased its medical loss ratio. In January, WellPoint began costs such as as nurse hotlines, "medical management," and "clinical health policy," under medical benefits.  Thus, the impact remains to be seen.
Unbelievable how well-wrteitn and informative this was.
Historically, health insurers like UNH have operated in much the same way; customers pay a premium then go see a doctor when they get sick. This approach suffers from a two-fold problem: customers may use the hospital more often than they would if they had to pay for each service, and when they use it, they often don't understand the treatment they receive. Consumerism aims to address both these problems by educating consumers about their health and health options in the hopes of discouraging the excessive use of medical services. Additionally, it also aims to make consumers more responsible for the costs they incur. UNH has responded to the consumerism movement by putting its data analysis to work; it has developed provider-quality measurements to analyze the effectiveness of its in-network health providers. This metric helps UNH identify high-cost, low-impact providers, therefore enabling the company to improve service and lower expenses by directing consumers away from such providers. These measures are also designed to inspire trust in UNH among its enrollees, in the hopes that building a relationship will help maintain membership.
I'm not easily impressed but you've done it with that psoting.
We could've done with that ingsiht early on.