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Medicare Advantage: Key Revenue Driver for UNH

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Oct. 24 2018, Updated 6:31 a.m. ET

Medicare Advantage growth estimates

According to the press release issued by The Centers for Medicare & Medicaid Services (or CMS), Medicare Advantage (or MA) enrollments are expected to rise by 11.5% from 20.2 million in 2018 to 22.6 million in 2019. According to CMS, MA enrollments are expected to account for more than 36.0% of the total Medicare beneficiaries in 2019.

UnitedHealth Group (UNH) expects to leverage this growth opportunity to boost its revenues in future years. The rapid pace of increase in the aging population in the United States is also a major growth driver for the company’s MA business in future years.

In the first nine months of 2018, UnitedHealth Group reported revenues of $56.57 billion for its UnitedHealthcare Medicare & Retirement business, which is a YoY (year-over-year) rise of 14.05%. In the third quarter, the business reported revenues of $18.79 billion, which is a YoY rise of 15.23%.

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MA enrollments

At the end of the third quarter, UnitedHealth Group’s MA enrollments reached 4.91 million, which was 125,000 members higher than in the second quarter. According to its third-quarter earnings conference call, UnitedHealth Group reported an increase of 65,000 MA enrollments in the Peoples Health in Louisiana plan.

According to its earnings call, almost 90% of UnitedHealth Group’s MA members aren’t expected to see any premium changes for their plans. Because the company can serve Medicare Advantage members much more cheaply than the cost incurred in the original Medicare program, it can launch new benefits for its senior membership at no added cost.

This focus on cost discipline, which translates into superior quality coverage for the higher-acuity MA population, is a key growth driver for UnitedHealth Group in 2018. Higher acuity is a term used by health insurers to refer to patients with complex conditions, requiring more care. These patients are costlier for payers than the average patient.

In the next article, we’ll discuss UnitedHealth Group’s employer and individual business.

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