What Really Drove UnitedHealth Group's Performance in 1Q16?
UnitedHealthcare Community & State business
UnitedHealthcare’s Community & State business earned revenues of $7.7 billion in 1Q16, which represents a YoY (year-over-year) increase of 12%. This growth was mainly fueled by solid increases in Medicaid enrollments as well as increases in the number of enrollees with complex needs. (For more on UnitedHealth Group’s (UNH) Community & State business, please refer to “UnitedHealth Group’s Community- and State-Based Insurance Business.”
The above graph shows that in 1Q16, Medicaid enrollments rose by about 8.1%, or 41,000, on a YoY basis. In 1Q16, the company added 145,000 new Medicaid enrollees on a sequential basis.
If UnitedHealth Group manages to sustain this rapid pace of adding new Medicaid enrollees, it could boost the company’s share prices as well as those of the iShares Core S&P 500 ETF (IVV). UnitedHealth Group accounts for 0.69% of IVV’s portfolio.
New contracts
UnitedHealth Group was awarded contracts to provide Medicaid services in two counties in California in 1Q16. Additionally, starting January 1, 2016, the company has been offering managed care services to 55,000 people under the New York Essential Plan.
UnitedHealth Group also started serving 200,000 additional Medicaid beneficiaries from April 1, 2016, through the Iowa Health link program. The company was also awarded a higher score in the company’s bid for participation in the Nebraska Medicaid expansion program in 2017. The score focused on UnitedHealth Group’s integrated model, which combines pharmaceutical, behavioral, and health services, and thus provides cost-effective solutions for people with complex needs.
UnitedHealth Group has managed to prove itself as strong competition for other Medicaid players such as Cigna (CI), Anthem (ANTM), and Aetna (AET), on account of the company’s prowess in acquiring new customers as well as in retaining customers.
In the next part, we’ll explore the performance of UnitedHealth Group’s Commercial business in 1Q16.
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