UnitedHealth Group Inc. (NYSE:UNH) (UNH) has markedly improved its customer service, President and Chief Executive Stephen Hemsley said Tuesday, providing an update on a problem area that helped drive a loss of commercial enrollment for the managed-care operator last year.
Hemsley, speaking on a conference call after UnitedHealth (NYSE:UNH) posted a 3.5% increase in fourth-quarter profit, also reported that the company is in "very advanced and productive discussions" with the U.S. Justice Department on the proposed acquisition of Sierra Health Services Inc. (NYSE:SIE) (SIE) and plans to close the deal "in the near future." "Our service levels have recovered strongly," and while there is more to do, "we are back to market performance levels," he said. UnitedHealth (NYSE:UNH) continues to expect a 2%, or approximately 550,000-member, decline in commercial enrollment in the first quarter, although the components of that total have changed from previous guidance, according to Hemsley.
The first-quarter decline in fee-based commercial enrollment now appears closer to 150,000 than to 200,000 people, he said, citing early improvements in service. The outlook for the decline in risk-based commercial members is now closer to 400,000 than to 350,000, Hemsley said.
In the fourth quarter, UnitedHealth (NYSE:UNH) saw a 75,000-member decline sequentially in commercial risk-based membership and a 480,000-member decline year over year. Total commercial enrollment was flat sequentially at nearly 25.53 million and down 175,000 year over year, as fee-based commercial membership increased.
Hemsley said UnitedHealth (NYSE:UNH) continues to match premium pricing to medical cost growth in its UnitedHealthcare, or commercial, accounts, and expects a stable full-year medical cost ratio of some 82%. Medical cost ratio represents the amount of premium revenue used to pay patient medical bills.
As for industry pricing, another UnitedHealth (NYSE:UNH) executive said on the call that the commercial managed-care market is rational but competitive, and that the behavior of nonprofit managed-care companies is unchanged over the past couple of years with consistent, competitive pricing. The individual-health insurance market is seeing more competitors, driving a higher level of price competition, he said.
Minnetonka, Minn.-based UnitedHealth (NYSE:UNH) posted net income of $1.22 billion, or 92 cents a share, up from $1.18 billion, or 84 cents a share, a year earlier. Prior-year results included about $50 million in stock-option-related expenses, including a $13 million charge related to historical stock options.
Revenue rose 3.2% to $18.7 billion.
The mean estimates of analysts polled by Thomson Financial were for earnings of 92 cents a share on $18.8 billion in revenue.
UnitedHealth (NYSE:UNH) reiterated its prior guidance for 2008, despite the fact the company has not yet acquired Sierra Health. UnitedHealth's (NYSE:UNH) prior forecast for 2008 earnings of $3.95 to $4 a share on revenue of about $83 billion assumed its pending acquisition of Sierra Health closed prior to the end of 2007.
Analysts' current mean estimate was for 2008 earnings of $3.96 a share on $ 79.8 billion in revenue.
The company also said it expects first-quarter earnings to be in the range of 82 cents to 84 cents a share. Analysts' mean estimate was for earnings of 83 cents a share.
UnitedHealth (NYSE:UNH) shares recently traded down $2.37, or 4.4%, to $52.04.
-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; dinah.brin@ dowjones.com
(Donna Kardos contributed to this story.)
(END) Dow Jones Newswires 01-22-08 1023 Copyright (c) 2008 Dow Jones & Company, Inc.
