UnitedHealth's 2Q profit rises 31 percent

By TOM MURPHY, AP Business Writer

INDIANAPOLIS (AP) - Health insurer UnitedHealth Group said Tuesday its second-quarter profit rose 31 percent as its commercial business did better than expected.

The Minnetonka, Minn., insurer said it earned $1.12 billion, or 99 cents per share, in the three months ended June 30. That's up from the $859 million, or 73 cents per share, in the same period last year. Revenue grew 7 percent to $23.26 billion.

Analysts polled by Thomson Reuters forecast earnings of 75 cents per share on nearly $23 billion in revenue.

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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 big health insurer to release its earnings every quarter, and many analysts and investors see it as a bellwether for the sector.

Commercial enrollment continued to tumble in a tough economy. Commercial membership fell by 440,000 from a year ago. That represents a decline of less than 2 percent, and UnitedHealth said the result was better than expected. In the first quarter, commercial enrollment fell 4 percent.

The insurer's largest segment, UnitedHealthcare, spent 82.2 percent of its commercial premium revenue on medical care. That's down 2 percent from a year ago. But that spending is up more than 3 percent from the first quarter, when some analysts felt the company might not be spending enough money on medical coverage in the wake of the recently passed health care reform law.

The law, which aims to cover millions of uninsured people, will require health insurers to spend at least 85 percent of their premium revenue on medical care for large group coverage and 80 percent for individual and small group coverage. Details of that part of the law have yet to be worked out.

Revenue for the Ovations Medicare and Medicare supplement business rose 13 percent to $9 billion. Revenue for the AmeriChoice Medicaid business increased 21 percent to $2.5 billion.

Commercial insurance generally offers higher profit margins for insurers than government business like Medicaid or Medicare Advantage. Health insurers have been struggling with losses in that business, as employers cut jobs and reduced the number of people covered by their private health insurance plans. But that may be improving.

After the first quarter, UnitedHealth said it now expected commercial enrollment to fall by between 400,000 and 500,000 people this year, an improvement from a loss of 500,000 to 950,000 it projected earlier this year.

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

(Copyright 2010 by The Associated Press. All Rights Reserved.)