UnitedHealth Group leads the health-plan market. But with increasing competition from WellPoint and an industry that’s reinventing itself around the Affordable Care Act, does the Dow component could have a shaky future?

Becoming a behemoth
Acquisitions have been the catalyst for UnitedHealth’s growth, increasing membership and the company’s geographic reach. Two significant acquisitions took place in the past year: The purchase of XLHealth brought in a relatively small group of plans tailored toward dual eligible Medicare patients, and a deal with Amil created a Brazilian presence and brought in roughly 5 million new beneficiaries.

The company organized its steady growth with a streamlining of segments into two categories: Optum, which includes a pharmacy benefit manager, and UnitedHealthcare. The latter accounted for about 95% of 2012 revenues and breaks down into these sub-segments:

• Employer & Individual: “Traditional” insurance that’s given through employer-backed group plans or sought out by individuals. Includes a new Department of Defense contract that will go into effect next month and provide coverage for 2.7 million military beneficiaries.
• Medicare & Retirement: Includes 2.6 million Medicare Advantage members, 4 million in standalone Part D drug programs, and 4 million in Medicare Supplemental, or Medigap, policies co-sponsored by AARP.
• Community & State: Includes Medicaid and Children’s Health Insurance Programs in 25 states. Also includes 250,000 dual eligible patients who qualify for both Medicare and Medicaid.
• International: Popped into existence with the Amil acquisition but still represents a small slice of the overall business.

The first two have the most bearing on UnitedHealth’s future. The health-insurance exchanges for the ACA will plump up the Employer & Individual segment as the currently uninsured join the market. The company should also benefit from Medicaid expansions. Medicare Advantage could see rate cuts, but UnitedHealth’s size means that small losses here and there won’t capsize the boat.

Sizing up the competition
WellPoint stands as UnitedHealth’s greatest competitor because of its similar number of covered customers. The company’s acquisition of Amerigroup last year was a solid play for a Medicaid presence. If WellPoint continues the smart purchases, UnitedHealth could lose its throne.

Here’s a side-by-side of metrics for the top five health-plan companies.

Sources: Company 10-Ks and Yahoo Finance
*Medical coverage only. Excludes other categories such as prescriptions and dental.

What’s MLR?
Before the ACA, the most important metrics for health-insurance companies were medical loss ratios, or MLR, and EPS. MLR represents the percentage of …read more
Source: FULL ARTICLE at DailyFinance