Understanding the Rise in UnitedHealthcare’s Commercial Enrollments in 1Q16
What Really Drove UnitedHealth Group's Performance in 1Q16?
UnitedHealthcare Employer & Individual business
UnitedHealthcare’s Employer & Individual business earned revenues worth $12.8 billion in 1Q16, which represents a YoY (year-over-year) increase of 12%. This strong growth in commercial enrollments, in addition to rising premiums from the higher medical costs of commercial risk-based plans, has been instrumental in boosting the company’s commercial revenues in 1Q16.
The graph below shows that UnitedHealth Group’s (UNH) commercial risk-based or fully insured enrollments rose by about 5.9%, from 8.1 million in 1Q15 to 8.6 million in 1Q16. Commercial fee-based or self-insured enrollments increased by about 2.4% in the same time period.
In 1Q16, UnitedHealth Group added about 700,000 new commercial enrollments on a sequential basis and around 1 million commercial enrollments on a YoY basis. The growth in commercial enrollees was well diversified across all geographies, funding types, and lines of business. (For more on fully insured and self-insured plans, please refer to “UnitedHealth Group’s Employer-Sponsored and Individual Insurance.”)
If UnitedHealth Group manages to sustain its rapid pace of adding new commercial enrollees, it could boost the company’s share prices as well as those of the iShares Russell 1000 Growth ETF (IWF). UnitedHealth Group accounts for 1.1% of IWF’s portfolio.
Commercial enrollment trends
To boost its commercial enrollments, UnitedHealth Group offers innovative and well-managed benefit structures, with high levels of physician engagement, to employers at competitive prices. The company also works in partnership with larger accounts to design customized products. It also regularly benchmarks performance for continuous improvement.
In 1Q16, UnitedHealth Group witnessed strong growth in enrollments, mainly in the small and middle market segments. The company, however, expects reduced activity in the national segment for 2017, on account of fewer large clients available in the market for bidding. Additionally, health insurance companies such as UnitedHealth Group (UNH), Aetna (AET), Cigna (CI), and Anthem (ANTM) are actively involved in renewing their existing large accounts for coming years, which further limits the number of new large accounts that a health insurance company can acquire in 2017.
The company did, however, give a weaker-than-expected performance in the commercial risk-based segment in 1Q16, as a large customer converted its account from a fully insured to self-insured funding arrangement.
Now we’ll look at UnitedHealth Group’s individual exchange strategy in 1Q16.
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