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UnitedHealth CEO Sees ‘Unsustainable’ Pricing in New York

By Caroline Chen
April 17, 2014 4:09 PM EDT 213 Comments

UnitedHealth Group Inc. (UNH), the biggest U.S. health insurer, said it may lose members in New York as the market becomes more crowded, driving down prices.

“We believe several carriers there, including new entrants, are pricing well below cost and at what we would view as unsustainable pricing levels,” said Chief Executive Officer Stephen Hemsley in a conference call today. “If this climate continues, we could see some further pressure on risk-based membership beyond the ranges we anticipated this year.”

Hemsley also said UnitedHealth may boost participation in public insurance exchanges set up under Obamacare. New York is now one of just five states where the insurer is involved an exchange. In comparison, WellPoint, the nation’s second largest health plan, is on 14 state exchanges.

Shares of Minnetonka, Minnesota-based UnitedHealth fell 3.1 percent to close at $75.78 in New York. The insurer has gained 26 percent in the past 12 months through today.

Net income in the quarter fell 7.8 percent to $1.1 billion, or $1.10 a share, hurt by cuts to the Medicare Advantage program for elderly and disabled Americans. Unitedhealth, the first insurer to report this quarter, is often a bellwether for results from other health plans.

The intensified pricing competition in New York is unique to the state as several competitors who previously left the marketplace re-entered in January, Gail Boudreaux, an executive vice president, said on the call. Nonetheless, the company will “stay very disciplined in our pricing,” she said.

New York is “one of the larger markets” for UnitedHealth, according to spokesman Tyler Mason, who said in an e-mail that the company doesn’t rank membership by states.

Public Exchanges

Hemsley did not elaborate on whether the price competition was being seen more on or off the exchange.

While UnitedHealth has had a “modest footprint” on the public exchanges set up by the Patient Protection and Affordable Care Act, the company now “has a bias to increase that participation in 2015,” said Boudreaux, without offering specifics. “The size of the overall market is positive.”

Hemsley said it’s “still very, very early in the life of the exchanges” and that UnitedHealth won’t have to make a final decision until September.

To contact the reporter on this story: Caroline Chen in New York at cchen509@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Angela Zimm

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