UnitedHealth Bets on Medicare, Medicaid After ACA Exchange Exit

Distracted Rivals

UnitedHealth has also benefited from the entanglement of its major rivals in two massive deals. Humana Inc. and Aetna Inc., the No. 2 and No. 3 sellers of private Medicare plans, in February ended their long effort to combine, after the transaction was blocked by a federal judge. Anthem Inc. and Cigna Corp. are embroiled in several legal challenges tied to their merger attempt, and a key ruling could come this week.

Health insurers are also getting a boost from a one-year pause of a tax on the industry under the Affordable Care Act. UnitedHealth said the tax holiday pushed the company's tax rate down to 30 percent, and that it expects the full-year rate now to be 32.5 percent.

The company's technology, consulting and medical-care arm, known as Optum, contributed to growth in the quarter. Optum posted operating earnings of $1.28 billion, 16% higher than a year earlier. Operating earnings at the health-insurance business climbed 15% to $2.13 billion.

UnitedHealth has used a series of acquisitions to expand Optum. In the first quarter, it acquired medical provider Surgical Care Affiliates Inc. in an about $2.3 billion deal. Surgical Care said it serves about 1 million patients a year at its 205 facilities. The OptumHealth medical unit mainly consists of urgent care and primary care, and saw revenue climb 18% in the quarter.

Growth was slower at the OptumRx pharmacy-benefits operation, where revenue increased 4.7 percent. The company acquired rival pharmacy-benefits manager Catamaran Corp. in 2015.

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