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The latest news on UnitedHealth from Business Insider
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    cigarette

    America's big pharmacy chains are taking massive, multi-billion dollar actions in their efforts to steal each other's business.

    On Wednesday, Rite Aid announced a $2 billion deal to acquire EnvisionRX, the latest in the drug retail industry’s ongoing consolidation in the pharmacy benefit manager (PBM) space. 

    While stores like Rite Aid and CVS focus on selling over-the-counter goods, what is kept behind the pharmacy counter is a separate and incredibly lucrative line of business run by the PBM.

    Rite Aid's new acquisition isn't just about adding sales to its top line. It's actually a direct response to competitor CVS, which flipped the competitive landscape with one highly-publicized move last year. 

    CVS' decision to stop selling tobacco products was for its own health, not consumers'

    Last year, CVS sent shockwaves across retail America by doing one thing: cutting out tobacco sales.

    “We’ve come to the decision that cigarettes have no place in an environment where healthcare is being delivered,” said CVS CEO Larry Merlo.

    The move was estimated to cut $2 billion of revenue annually, something that seemed to be impossible to recover quickly. But CVS knew exactly what it was doing.

    CVS PharmacyShortly after its decision to quit tobacco, CVS also decided to charge a higher co-pay — up to $15 greater on prescriptions — to its Caremark customers filling drug orders at other pharmacies that retail tobacco products. Keep in mind, while CVS operates pharmacies in its 7,800 retail outlets, its Caremark business runs a massive network of 68,000 pharmacies (including CVS) across the country.

    In effect, CVS took a public health policy and turned it into a weapon against its competitors, big and small. 

    Short-term, this creates a problem for independent, family-run operations — of which there are thousands across the country — as well as Walgreen and Rite Aid, now left with a difficult choice to make: eschew top-line gold in smokes and chewing tobacco, or inevitably lose customers that, thanks to CVS’ ownership of Caremark, will have to go out of their way to shop at CVS, or incur a penalty of up to $15 per visit many American families can ill-afford.

    Everybody wants to get into the PBM game

    CVS’ ongoing buildout of Caremark, both by developing relationships with heath plans and buying out smaller competitors, and Rite Aid’s EnvisionRX deal, could foreshadow a change in course by Walgreens Boots Alliance, which has built out a global empire of retail outlets after shedding its own PBM in 2011.

    For CVS, ever since acquiring Caremark, it has seen a growing percentage of its revenue derived not from retail outlets, but from the PBM. 

    Screen Shot 2015 02 12 at 9.56.48 AMRite Aid’s Wednesday deal wasn’t its first attempt to elbow its way into the PBM space; the company bought PCS Health Systems in 1998 from Eli Lilly, but sold it in 2000 to a company that would ultimately be acquired by CVS seven years later.

    There are plenty of existing PBMs available for M&A, for buyers of all sizes. The space is divided between PBMs run by pharmacies themselves, and another group of drug benefit providers that have their share structure divided among healthcare providers, like UnitedHealth. UnitedHealth has been building out its own PBM, called OptumRX, into one of the country’s largest drug benefit providers with more than 24 million customers, according to its website. Prime Therapeutics, based in Minnesota, is privately-held with its structure divided among more than a dozen Blue Cross Blue Shield health plans, and is about the size of OptumRX. 

    The Wal-Marts of the world could be the next big PBM buyers

    The biggest remaining independent players in the space include Express Scripts (market capitalization of more than $60 billion) and Catamaran Corp. (market cap of about $11 billion).

    While Rite Aid has limited capacity to expand into, owing to its size, either of these companies could one day become attractive to Wal-Mart, and Catamaran could appear particularly enticing to the supermarkets looking to fend off Wal-Mart’s foray into drug retailing, like Kroger and Safeway. 

    For the builders of the new mega-PBMs, their growing size doesn’t just translate to a top-line injection from consumers: they will also increasingly be able to wield power over drug providers for better pricing options, as well. Because the independent pharmacies of the US, added together, generated nearly as much revenue as the top corporations in 2013 (more than $40 billion), there is plenty more room for organic growth for industry behemoths at the expense of mom-and-pop shops.

    The endgame

    The endgame for the PBM space appears to be more M&A: what isn’t certain is whether CVS’ competitors will quit tobacco revenue in order to do business with one of the country’s top prescription plans, or if they will just try to buy their way around CVS.

    Wednesday, Rite Aid looked ready to fight by growing scale rather than quit tobacco. 

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    UnitedHealth Chief Executive Officer Stephen Hemsley takes part in a panel discussion titled "Getting From Care to Cure" at the Milken Institute Global Conference in Beverly Hills, California May 1, 2012. REUTERS/Danny Moloshok

    (Reuters) - Health insurer UnitedHealth Group agreed to buy Catamaran Corp in a deal worth about $12.8 billion to boost its pharmacy benefit business as it competes with bigger rivals such as Express Scripts Holdings Co.

    Pharmacy benefit managers (PBM) administer drug benefits for employers and health plans and run large mail order pharmacies, helping them get better prices from drugmakers.

    As employers look to cut prescription costs on expensive drugs, the deal with Catamaran will give UnitedHealth's pharmacy benefits unit, OptumRx, the scale to negotiate favorable prices in the lucrative PBM market.

    Catamaran was formed after SXC Health Solutions and PBM Catalyst Health Solutions merged in 2012.

    UnitedHealth's offer of $61.50 per share represents a premium of 27 percent to Catamaran's Friday close on the Nasdaq.

    Catamaran's stock was trading at $60.01 premarket on Monday, while UnitedHealth was up nearly 4 percent.

    The deal "makes sense to us, but admittedly came much earlier than we expected," Jefferies analyst Brian Tanquilut said in a research note.

    "We had always viewed Catamaran as a compelling asset for companies looking for scale in the PBM sector such as Optum or Walgreens but expected Catamaran to grow the business much further before pursuing a sale."

    He added that the offer seemed adequate and he did not expect competing bids at this point.

    UnitedHealth said it expects to fill more than one billion prescriptions after the deal.

    The deal value is based on Illinois-based Catamaran's total diluted shares outstanding as of Dec. 31.

    The transaction is expected to close in the fourth quarter of 2015 and add about 30 cents per share to UnitedHealth's profit in 2016, the companies said.

    After the deal closes, Catamaran Chief Executive Mark Thierer will serve as CEO of OptumRx. Timothy Wicks, the current CEO of OptumRx, will become president.

    (Editing by Savio D'Souza and Saumyadeb Chakrabarty)

     

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    pharmerica stock

    Pharmacy services company PharMerica's shares are are up more than 50% in 2015.

    This week, they reached an all-time high.

    One possible reason: People in the investment banking and healthcare industries speculate that PharMerica will soon be acquired.

    PharMerica's main business is delivering prescription drugs to nursing homes. Its market cap is right around $1 billion.

    Four years ago, an even bigger company in the same business, Omnicare, tried to buy PharMerica. The Federal Trade Commission quashed the deal, saying it would hurt competition.

    Yesterday, Omnicare itself was acquired — by pharmacy giant CVS. The price tag: $13 billion.

    Now PharMerica is the last independent company in the space. Many in the industry believe it will not remain independent for long.

    "There is speculation PharMerica is going to be the next target," said Ed Buthusiem, managing director and healthcare expert at Berkeley Research Group. 

    Buthusiem says buyers shouldn't be worried about anti-trust concerns.

    Lately, mergers and acquistions in the pharmacy and prescription-benefit management segment have gotten a pass from regulators, as lawyers for the deals can successfully argue that consolidation in the sector is helping lower the cost of healthcare.

    Buthusiem pointed toward other pharmacy storefront operators, like Walgreen, and healthcare conglomerates, like UnitedHealth Group, as potential buyers. 

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    Obama

    UnitedHealth Group might ditch the Affordable Care Act, aka Obamacare.

    In a release Thursday morning, UnitedHealth said the company is "evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017."

    Said another way, the country's biggest health insurer is wondering if it still makes sense to offer insurance to people through an Obamacare-mandated exchange.

    UnitedHealth tempered expectations for its 2015 and 2016 earnings, citing losses on "individual exchange-compliant products related to the 2015 and 2016 policy years."

    UnitedHealth said earnings for the full-year 2015 would now be around $6.00 per share, or $0.26 per share below what the company previously expected.

    Next year, the company expects to earn $7.10-$7.30 per year for the full year. UnitedHealth is set to hold an investor conference December 1. In afternoon trade on Thursday, shares of UnitedHealth were down about 5%.

    The Affordable Care Act requires all people to have health insurance. To facilitate this, the government set up exchanges where people can go to compare and ultimately buy insurance for themselves and their families.

    And UnitedHealth is now coming out and saying it might not make sense for them to participate in these exchanges anymore.

    According to The Wall Street Journal, UnitedHealth CEO Stephen Hemsley said on a call this morning: "We can't subsidize a market that doesn't appear at this point to be sustaining itself."

    In its statement, UnitedHealth added that the company "remains a strong supporter of sustainable efforts to ensure access to affordable, quality care for all Americans, and has advocated publicly for this for more than 20 years, including as one of the first businesses to focus on serving people through managed Medicaid and Medicare."

    SEE ALSO: The Young Adult's Guide To Affordable Health Insurance

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    UnitedHealth Chief Executive Officer Stephen Hemsley takes part in a panel discussion titled

    NEW YORK (Reuters) - UnitedHealth Group Inc's chief executive officer on Tuesday defended the company's possibly exiting the Obamacare health insurance exchanges in 2017, citing losses on health plans it said were designed to succeed.

    CEO Stephen Hemsley said that the health insurer had kept costs down by selling plans with small doctor networks, and that it had priced them competitively. The company signed up members with better health than the overall exchange population, but it still lost money, he said.

    "We could not sustain the eroding level of losses on our exchange products," Hemsley said during its annual meeting with investors. UnitedHealth last month warned of mounting losses and said it might pull out of the exchanges.

    That news surprised investors, pulling down shares of UnitedHealth and competitors on the exchanges, including Aetna Inc and Anthem Inc.

    Hemsley said it was not yet known if the exchange problems were limited toUnitedHealth, or if they reflected a structural issue with the exchanges. The exchanges were created under the Affordable Care Act, also known as Obamacare, and provide insurance to more than 9 million individuals.

    Under the law, insurers cannot refuse coverage to anyone, and many insurers including Aetna and Anthem have said some members are using medical services heavily, contributing to losses.

    "There likely won't be a single broadly accepted marketplace conclusion for some time," Hemsley said. The company formed its view based on its own business, he said, but indications were that other insurers in the marketplace were seeing similar dynamics.

    In the first half of 2016, UnitedHealth will decide whether to take part in any given region after doing a "product by product, market by market" review, Hemsley said.

     

    (Editing by Franklin Paul and Jeffrey Benkoe)

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    UnitedHealth Chief Executive Officer Stephen Hemsley takes part in a panel discussion titled

    Insurance giant UnitedHealth Group on Tuesday seemingly took another step closer to bailing out of Obamacare in 2017 when its top corporate executive engaged in more public handwringing over financial losses and conceded strategic mistakes in rushing into the system.

    While a pullout by UnitedHealth would deliver a serious blow to the future of President Obama’s signature health insurance law, a larger concern is whether its departure would trigger a stampede to the door by other bigger players in Obamacare, including Aetna and Anthem.

    “What United and other big insurers will do hinges in a big way on how much enrollment in the [American Care Act] marketplaces grows over the next couple years,” said Kaiser Family Foundation Senior Vice President Larry Levitt. “Increasing enrollment will keep insurers interested in the market, and will also bring in more healthy consumers, which will moderate premium increases.”

    “However, if enrollment stagnates, I could see some other big, national insurers follow United’s pessimistic lead,” he added in an interview.

    UnitedHealth shook up the market Nov. 19 by revealing that it was considering pulling out of Obamacare after suffering hundreds of millions of dollars in losses related to Affordable Care Act business.

    In a mea culpa to investors meeting in New York today, UnitedHealth CEO Stephen Hemsley said that the company should have stayed out of the Affordable Care Act market a little longer than just the first year to better size up its profitability.

    “It was for us a bad decision,” Hemsley said, according to Bloomberg Business. “I take accountability for sitting out the exchange market in year one so we could in theory observe, learn and see how the market experience would develop. This was a prudent going-in position. In retrospect, we should have stayed out longer.”

    UnitedHealth Chief Executive Officer Stephen Hemsley takes part in a panel discussion titled The company gingerly entered the market last January after sitting out the first full year of Obamacare operations in 2014 to better gauge the potential profitability. The company revealed Nov. 19 that it was leaning towards pulling out after the coming year after a surprisingly poor performance this year providing individual policies in federal and state-run insurance markets.

    Hemsley said that his company had kept costs down by selling plans with small doctor networks and pricing the plans competitively, according to Reuters. UnitedHealth generally enrolled consumers with better health than the overall exchange population but it still lost money, he said.

    "We could not sustain the eroding level of losses on our exchange products," Hemsley said.

    UnitedHealth’s latest warning of a better than 50-50 chance that it will pull out is the latest serious blow to the Obamacare system. The administration’s Obamacare enrollment projections for the coming year are substantially down to 10 million, the projected cost of premiums and out-of-pocket costs are up, and nearly half of the insurance co-ops associated with the program are going out of business at the end of the year.

    Moreover, there will be a sharp reduction of more than 40 percent in the number of health plans on HealthCare.gov known as PPOs – or preferred provider organizations – which offer enrollees greater flexibility in where they can get medical services covered by their insurer.

    During his session with investors, Hemsley said it was too soon to say whether the exchange problems were limited to his company, of if they reflected a “structural issue” that may plague the other major insurers, including Aetna and Anthem.

    Under the terms of the Affordable Care Act, insurance companies cannot deny coverage to anyone, including those with pre-existing health care problems. Hemsley said that many insurers have complained that some customers are making frequent use of their policies, which had contributed to losses.

    Obamacare

    "There likely won't be a single broadly accepted marketplace conclusion for some time," Hemsley said, while adding that other insurers were encountering similar problems to those of UnitedHealth.

    Although it is the largest health insurance provider in the country, UnitedHealth holds a relatively small part of the overall Obamacare market. According to The Los Angeles Times, United Health has sold health insurance plans to just 5.5 percent of the approximately 10 million Americans who use Obamacare to acquire coverage, and is offering plans in 34 states this year.

    In the coming weeks, the administration and industry analysts will keep a close watch on other major insurers within the Obamacare network, including Aetna, Anthem (BlueCross Blue Shield), Cigna and Humana, all of which saw their stocks tumble following United Health’s announcement that it was considering withdrawing from the field.

    “It’s still important to remember that while United is a very big insurer, they have never been a major player in the individual insurance market,” Levitt said. “The individual market has always been dominated by Blue Cross Blue Shield plans.”

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    Obamacare

    NEW YORK (Reuters) - UnitedHealth Group's decision to exit most of its Obamacare health insurance exchanges next year means rivals will need to raise prices further to prop up an unprofitable business, healthcare analysts and policy experts said on Tuesday.

    The largest U.S. health insurer's move would likely reduce consumer choices, particularly in states where UnitedHealth has been one of only a handful of players to offer insurance under President Barack Obama's healthcare law, they said.

    Large pullbacks by providers like Anthem and Aetna are unlikely as they each await approval from the administration for proposed merger deals with smaller rivals, some analysts said.

    Spokespeople for Aetna and Anthem declined to comment on Tuesday.

    UnitedHealth is one of the biggest sellers of Obamacare plans, offering them in 34 states in 2016. The company warned in November that it was losing too much money on the business due to low enrollment and high service costs. On Tuesday, it said it would exit all but a handful of those markets.

    Many of the estimated 650,000 UnitedHealth plan members at the end of 2016 would need to find another insurer.

    "You will see significant rate increases for 2017 as the (health) plans try to figure out what is a premium at which (they) can make money," said Caroline Pearson, senior vice president at research firm Avalere Health.

    The government provides income-based tax credits to most exchange users, which would help soften the blow from any higher premiums, she said.

    "In terms of viability of the exchanges, I don't think that this is going to affect that in the long term," said Yevgeniy Feyman, deputy director of health policy at the Manhattan Institute for Policy Research.

    Even if other insurers decided to leave, he said, he could not envision the exchanges being so unprofitable that they ceased to work.

    A recent Kaiser Family Foundation study found UnitedHealth's departure would leave only one insurer in 29 percent of the 1,855 counties where it offered health plans. The report found that if United had not participated in the exchanges in 2016, the national weighted average benchmark "silver" plan would have been about 1 percent higher in 2016.

    Republican lawmakers have repeatedly sought to repeal the Affordable Care Act, also known as Obamacare, which provides tax credits to help uninsured individuals buy medical coverage. They have said it creates unwarranted government intervention in personal healthcare and have warned that insurers would be left to cover sicker and older individuals.

    doctors

    Tough business

    U.S. health insurers including Aetna and Anthem have also lost money on the exchanges, but have not said they would exit. The Obama administration estimates more than 12 million people signed up for private insurance on the exchanges for 2016.

    Insurers are in the midst of submitting proposed premium rates for 2017 ahead of mid-May deadlines set by state exchanges and insurance regulators.

    Aetna Chief Executive Officer Mark Bertolini has questioned whether the Obamacare business was sustainable, but said he was working with the government to improve it. Anthem CEO Joseph Swedish has said that the company was committed to the exchanges.

    "I would still be surprised if other major insurers followed United's lead. United was in some sense in a category all its own," Kaiser Family Foundation Senior Vice President Larry Levitt said. 

    Health plans sold to individual members represented a small part of UnitedHealth's revenue compared to large-scale contracts with employers, while Aetna and Anthem both had substantial business serving individuals.

    Aetna and Anthem are undergoing a U.S. Department of Justice review of what would be an historic consolidation in the health insurance industry. Aetna has proposed buying rival Humana Inc, while Anthem has agreed to buy Cigna Corp.

    (Editing by Michele Gershberg and Richard Chang)

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    doctors listening obama concerned

    Obamacare has a millennials problem, and the healthcare program is struggling to get rid of it.

    To recap, one of the main reasons that large health insurance firms such as Aetna and United Healthcare care ditching the public insurance exchanges of the Affordable Care Act — also known as Obamacare — is because not enough young, healthy people are signing up.

    Insurers need young people to, in a basic sense, pay into the system, since they tend to be healthier and use fewer healthcare services — thus partially subsidizing the older and less healthy people that cost more to cover than they pay in.

    Since the rollout of the exchanges, the number of young, healthy people signing up has not been enough to offset the sicker population, leading to millions of dollars in losses for many insurers.

    According to new data from the Centers for Disease Control and Prevention's National Center for Health Statistics division, it appears that the gap between the percentage of younger and older people without insurance is not closing.

    About 16% of Americans ages 25 to 34 do not have health insurance, according to NCHS data released on Wednesday. About 14% of those ages 35 to 44 go without coverage as well.

    When you get to the ages 45 to 64 bracket, however, that figure drops to just 8.1%.

    Screen Shot 2016 09 07 at 3.10.58 PM

    While the uninsured rate for each of the three age groups has declined, the gap among the age brackets has stayed stubbornly consistent. The roughly 8 percentage point gap between the youngest non-Medicare-eligible cohort and the oldest is slightly smaller than it was before the ACA, but evidently it has not closed enough to make a difference for the risk pools in the exchanges.

    The hope of Obamacare was that with the combination of accessibility and penalties, more young people would get covered. If the gap were to close, this could recalibrate the risk and make the exchanges more financially viable for large insurers.

    There is still some hope. The gap has closed some — but not as much as Obamacare's architects had hoped. Additionally, the full financial penalties for not having coverage are going into effect this year, potentially spurring more healthy young people to purchase insurance.

    In order to address this, the Centers for Medicare and Medicaid Services proposed new outreach funding as part of a larger package of adjustments to the ACA's administration.

    SEE ALSO: Obamacare can succeed, but it needs a huge amount of work

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    Obama doctors Obamacare

    President Barack Obama is enlisting the help of some health insurance companies to try to fix the Affordable Care Act, better known as Obamacare.

    Obama dropped by a meeting with Secretary of Health and Human Services Sylvia Burwell and 13 health insurance CEOs, including the CEOs of Humana and Cigna, to emphasize the need to work together on the ACA's public marketplaces.

    Recently, a number of high-profile insurers have rolled back their offerings on the ACA exchanges. This has led to questions about the long-term sustainability of the ACA.

    In addition to the meeting, Obama sent a letter to the CEO of every health insurance company participating in the exchanges asking for help improving them.

    Obama acknowledged that there have been struggles during the first few years of the exchanges.

    "We know that this progress has not been without challenges," the letter said. "Most new enterprises have growing pains and opportunities for improvement. The marketplace, while strong, is no exception. Time and experience will help drive that improvement, as will constructive policy changes."

    Obama said Burwell and her department are working on making needed changes, as is his administration, but that the government needed the support of the companies to make it work.

    "To that end, I want to enlist your help as we head into this fourth annual open enrollment period," the letter said. "We know that signing up more uninsured Americans for coverage generates benefits all around."

    The letter says the administration is attempting to address some challenges, including the fact that fewer young people than expected are signing up through the public exchanges, making it costlier for insurers.

    Here's Obama (emphasis added):

    "And since the remaining uninsured are disproportionately younger and healthier, signing them up improves the risk pool and consequently the affordability of coverage for all enrollees.

    "Secretary Burwell has developed a data-driven plan to find and enroll those who still lack coverage, including by stepping up the outreach activities that worked best over the last 3 years; working with the Department of the Treasury to reach out to uninsured people who paid the individual responsibility fee for 2015; and increasing our focus on enrolling young adults.

    "We are also hosting a Millennial Outreach and Engagement Summit at the White House on September 27 focused exclusively on how to enroll more youth in the Marketplace during open enrollment. We welcome efforts to increase your outreach during this open enrollment period."

    Obama said the "work is not over" in implementing the ACA.

    Of note, the CEOs of Aetna and United Healthcare were not in attendance. Both companies are part of the "Big Five" nationwide insurers and have announced plans to substantially roll back their Obamacare coverage.

    SEE ALSO: The future of Obamacare

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    south carolina state flag

    South Carolina became the fifth state to have only one company offering health insurance through its Affordable Care Act exchange.

    The South Carolina Department of Insurance announced on Tuesday that Blue Cross Blue Shield of South Carolina will be the sole provider for South Carolinians looking to get covered through the ACA, better known as Obamacare, according to The Post and Courier.

    Aetna and United Healthcare both announced earlier in 2016 that they would pull out of the state's exchanges, and BCBS of SC said it would no longer offer coverage through its BlueChoice subsidiary, according to The Post and Courier's Lauren Sausser.

    Sausser also noted that Obamacare premiums will increase by an average of 27% in the state.

    South Carolina becomes the fifth state to officially be left with a single insurer in the Obamacare exchanges, with Alabama, Alaska, Oklahoma, and Wyoming. Based on current projections, North Carolina and Kansas could also be left in the same boat.

    obamacare competition problems map

    Insurance firms have struggled with a group of enrollees that have been sicker and older than expected, leading to large losses for the firms. This has been especially acute in states that did not expand their Medicaid offerings, such as South Carolina.

    This has caused insurers like Aetna and United Healthcare to ditch some of the more rural coverage areas, leaving residents of those areas high and dry. Even states with more competition are facing strains, such as Tennessee and Minnesota.

    On the positive side, most of the premium increases, while intense, appear to be a normalization after insurers underpriced plans in the first few years of the law.

    Jonathan Gold, a spokesperson for the Department of Health and Human Services, said in a statement that the changes are not representative of the experience of all of South Carolinians. From Gold's statement:

    "HHS projected that the majority of South Carolina Marketplace consumers would still be able to purchase coverage for less than $75 per month even if all Marketplace premium rates were to increase by double digits. Meanwhile, for the 50 percent of people in South Carolina with employer coverage, premiums have grown at some of the slowest rates on record since the Affordable Care Act was enacted.

    "All South Carolina consumers, no matter where they get their coverage, are benefiting from ACA protections like no more exclusions for preexisting conditions, no annual limits on coverage, and no cost sharing for preventive services."

    The 2017 open enrollment period for Obamacare begins November 1. The Obama administration and health officials are expected to make a strong push to get younger people to sign up for ACA plans to alleviate some of the stress on the system.

    SEE ALSO: 2.5 million Americans are leaving money on the table while buying health insurance

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    doctor smile happyUnitedHealth Group, the largest US health insurer, reported better-than-expected quarterly profit and revenue, helped by strength in its Optum business.

    The company also increased its forecast for 2016 adjusted net earnings to about $8.00 per share, from $7.80-$7.95.

    UnitedHealth's net earnings attributable to shareholders rose to $1.97 billion, or $2.03 per share, in the third quarter ended Sept. 30, from $1.60 billion or $1.65 per share, a year earlier.

    On an adjusted basis the health insurer earned $2.17 per share, beating average estimate of $2.08, this was a 23% increase for net earnings from the same quarter last year.

    The company said its consolidated medical care ratio, or the amount it spends on medical claims compared with the insurance premiums that it brings in, decreased 60 basis points to 80.3 percent in the third quarter.

    Total revenue rose to $46.29 billion from $41.49 billion, slightly above analysts' estimate of $46.09 billion.

    The strong earnings comes two quarters after the firm announced it was rolling back most of its business in the Affordable Care Act, better known as Obamacare, exchanges starting next year.

    Open enrollment for Obamacare's 2017 plan year begins November 1. UnitedHealth said it will remain in only "a handful of states" going forward. United was the first of three major insurers — including Aetna and Humana — to seriously roll back their Obamacare offerings this year.

    The company said that the number of people it covers in the individual marketplace, which includes the Obamacare exchanges, decreased on a year-over-year basis.

    Following the news, shares of UnitedHealth ticked up $1.87 a share to $136.00, a 1.36% increase.

    SEE ALSO: 1.4 million people are about to lose their current Obamacare coverage

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    obama obamacare doctors

    The Affordable Care Act, better known as Obamacare, is still taking a serious chunk out of UnitedHealthcare's profits, according to its CFO, but at least it's not getting any worse.

    In the company's earnings call on Tuesday, Dan Schumacher, CFO of the main UnitedHealthcare division, said the firm is still losing money on the ACA business but those losses have not accelerated.

    In the second quarter, UnitedHealth increased its loss projections for 2016 by $200 million.

    "When you look at the performance inside the quarter, I would tell you that, as you pointed out, nothing's really changed on the ACA front and that's a good thing," said Schumacher. "Our third quarter was very much in line with our revised expectations that we set coming out of the second quarter and we've continued to maintain our full-year view, to be more specific about it."

    Schumacher said the firm lost around $200 million from its exchange business, but that was in line with its expectations for the quarter and the full year.

    This comes as the firm covers 770,000 people through the exchanges, according to Schumacher, which will likely decrease after the firm rolls back much of its Obamacare offerings starting next year.

    UnitedHealth — along with other large insurers like Aetna and Humana — have been losing more and more money through the exchanges. This is in part due to higher than expected costs for large insurers on the exchanges, but also because the pool of those getting insurance through the exchanges has been older, sicker, and more expensive than originally thought.

    Besides providing the business update, UnitedHealth Group CEO Stephen Hemsley said that the company did not want to address the current state of Obamacare since a new administration will be taking over the White House soon.

    "I think commenting beyond that, particularly as a new administration takes hold and so forth, our posture is to be very constructive about making the marketplace work most effectively and serving the most number of individuals and making that system simpler and more usable for everybody," said Hemsley.

    "So I think beyond commenting on that level I don't think we are going to get into what's going to happen going forward, on either a state basis or federal."

    He did, however, say that Medicaid expansion has been "a very significant success of the ACA" and states that accepted the expansion have seen their exchanges become "more stable and better performing."

    Following stronger than expected earnings, UnitedHealth is trading higher on Tuesday at $143.49, just over a 7% jump.

    Screen Shot 2016 10 18 at 3.00.54 PM

    SEE ALSO: 1.4 million are going to lose their current Obamacare coverage

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    Barack obama

    The Affordable Care Act is facing a huge test.

    Tuesday marks the start of open enrollment for the 2017 plan year of the ACA's public exchanges. That's the part of the law, better known as Obamacare, that is designed to give people access to health insurance if they can't access it through their employers or the government.

    After news of rising premiums, the withdrawal of several insurance companies, and the US campaign season, we'll finally get a chance to see how healthy the public exchanges — the most talked-about part of the law — really are.

    After all the negative headlines, it appears that this open-enrollment period is especially important for the future of one of President Barack Obama's signature achievements.

    How we got here

    The ACA doesn't exclusively pertain to the exchanges. There are other elements of the law that affect all Americans, such as a child's ability to stay on his or her parent's insurance until they're 26 years old and the removal of lifetime limits on insurance payouts.

    For better or for worse, the sustainability of the exchanges is probably the most often used benchmark for people judging its success or failure, despite the fact that only roughly 5% of Americans get their insurance through the exchanges.

    The problems with the Obamacare exchanges are now well documented. Fewer healthy people have signed up for the plans, and that has caused the pool of people in the exchanges to be older, sicker, and more expensive to cover. That's led to losses for many insurers.

    Some of the biggest and most high profile of these insurers — such as Aetna and UnitedHealthcare and startup Oscar— have pulled back their offerings in these markets. And the exchanges have become political fodder for everyone from Republican Speaker of the House Paul Ryan to presidential nominee Donald Trump. Even former President Bill Clinton has talked about flaws in the marketplace, though he later clarified he supports the ACA.

    The law's supporters say these are growing pains.

    "This is one of the most complex social programs in the country's history,"Kevin Counihan, the CEO of the Marketplace at the Centers for Medicare and Medicaid Services (CMS), said in an interview with Business Insider. Counihan oversees the exchanges.

    "We only have three years of operation," he added. "Big programs like Social Security and Medicare also had problems in their first three years."

    Counihan said that many insurance companies are not used to these types of markets, which are more like "Medicaid-plus" than the employer-based market, so a "learning curve" isn't surprising.

    Make or break year

    The Department of Health and Human Services (HHS), which is responsible for administering the law, projects that 13.8 million Americans will sign up or continue to get coverage through the exchanges in 2017, up from 12.7 million last year.

    The 2017 enrollment also features massive jump in the average premium cost from last year — the HHS projects it to be 25% for the baseline silver-level plan for the country. These jumps are even more severe in certain states, with Arizona leading the way with a 116% increase over the average premium in 2016.

    obamacare premium increases

    According to Cynthia Cox, associate director for the Program for the Study of Health Reform and Private Insurance at the nonpartisan research group Kaiser Family Foundation, these price increases and market shifts have been coming for some time.

    "The premium increases were something we were expecting," Cox told Business Insider. "They're a bit higher than we thought they would be, but insurers have been signaling for months that this year they needed to dramatically increase premiums to make up for losses on the exchanges."

    Counihan said that these increases came about in part because many insurers did not have experience with the type of coverage needed for Obamacare, so they underpriced their plans to attract patients without properly rating the costs.

    Additionally, the jump now brings premiums roughly in line with the nonpartisan Congressional Budget Office's original 2010 projection for premiums on the exchanges for 2017.

    This year is also more important because this is the first time the exchanges will be without their "training wheels." Insurers previously had three different ways, provided by the government, to mitigate losses from the exchanges: reinsurance, risk corridors, and risk adjustment. Now that is being shaved down to only the risk-adjustment program.

    Additionally, 2017 will be the first year that the full penalty for not having insurance will go into effect, but the fee will not show up on tax bills until after the open-enrollment period.

    Counihan downplayed the idea that this is a pivotal year for the exchanges, saying that it is a "retooling year." Additionally, Counihan said the HHS and CMS have plans to make sure they meet their targets and grow the exchanges, including outreach targeted at young people who would help stabilize the risk pools.

    "We have a lot of data and good outreach plans for this year to get all kinds of people to sign up," said Counihan. "I mean, we know what we're doing — we're not just throwing darts and hoping it hits."

    The figure of success, Cox said, will be if the exchanges can sustain the number they have.

    "If we start to see sign-ups decrease, that would raise a lot of questions about the long-term sustainability of the exchanges," Cox said. "If people are deciding to leave the exchanges, that could lead to more insurer exits and be a real problem."

    That may be a low bar to clear, but given the negativity surrounding the exchanges for much of the past six months, perhaps no bad news is good news.

    The future is uncertain

    The real proof of the success or failure of the law likely won't come from the sign-up numbers alone, according to Cox. Instead, the real tell will be the proposals for 2018 premiums that the health-insurance companies have to submit to individual state regulators in the spring of 2017.

    "That's really when we'll know whether this was just a one-year change or something larger and longer-lasting," Cox added. "If premiums rise significantly again and you start to see more providers leaving the exchanges, that will raise a lot of long-term questions."

    As Aetna CEO Mark Bertolini put it in an interview with Bloomberg, this could lead to a constant chase of healthy people opting out of the exchanges because of high costs, which in turn leads to higher premiums to cover the ever-sicker pool in the exchanges.

    "So what happens is the population gets sicker and sicker and sicker and sicker, the rates get higher to try and catch it — it's a fruitless chase, and ultimately you end up with a very bad pool of risk," said Bertolini. With a very bad pool of risk, more insurers dump their exchange business until it becomes unsustainable.

    Given these issues, most people agree that the law could use some tweaks. Obama himself said the law was like a new phone that rolls out with "a few bugs" and needs to be updated to stabilize it.

    There have been several proposals, mostly split along ideological lines. Mostly conservative detractors of the law have suggested repealing the ACA altogether, while on the other end of the spectrum observers have used the shortcomings to call for a nationalized health system.

    In the middle, proposals include adjusting a rule that only allows insurers to charge older people three times what they charge young people, strengthening the tax on people without insurance, and more variety instead of sticking with the four-tiered system in place now.

    According to Cox, pretty much any of these adjustments would help fix the issues the Obamacare exchanges are facing.

    "Any or all of these changes could have the effect of stabilizing the marketplace," Cold told us. "Also, they don't have to be done in isolation — any number of them could be used in combination to address the challenges facing the market."

    The problem is that all these changes can be enacted only if Congress passes a law amending the ACA. "The HHS and CMS are really limited in what they can do now to address these issues," said Cox.

    In the end, most of the changes come down to a political vote, and given the current make-up of Washington, it is unlikely anything comes to fruition. Counihan called it a "less-than-helpful political environment."

    Cox agreed much of the law's long-term survival has little to do with its impact on healthcare, but rather the political appetite for the law. Regardless of possible changes, Counihan said the law has earned a permanent place in the healthcare system of America (though he is admittedly biased). Cox said the ACA and its exchanges have made an impact, but whether or not they survive remains to be seen.

    "It depends on politics and market stability," he added. "It's equally, if not more, important how Americans perceive the law, and right now they're pretty split."Based on Kaiser's polling, 45% of Americans have a favorable view of the ACA and 45% have an unfavorable view.

    Open enrollment closes January 31.

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    UnitedHealth Chief Executive Officer Stephen Hemsley takes part in a panel discussion titled

    The U.S. Justice Department has joined a whistleblower lawsuit against UnitedHealth Group Inc. that claims the country's largest health insurer and its units and affiliates overcharged Medicare hundreds of millions of dollars, a law firm representing the whistleblower said on Thursday.

    "We reject these more than five-year-old claims and will contest them vigorously," UnitedHealth spokesman Matthew Burns said in a statement.

    The lawsuit, filed in 2011 and unsealed on Thursday, alleges UnitedHealth Group overcharged Medicare by claiming the federal health insurance program's members nationwide were sicker than they were, according to the law firm Constantine Cannon LLP.

    The Justice Department has also joined in allegations against WellMed Medical Management Inc., a Texas-based healthcare company UnitedHealth bought in 2011.

    The lawsuit by whistleblower Benjamin Poehling, a former UnitedHealth executive, has been kept under seal in federal court in Los Angeles while the Justice Department investigated the claims for the past five years. Constantine Cannon posted the lawsuit online when it was unsealed on Thursday.

    No total damages were specified in the lawsuit.

    (Reporting by Akankshita Mukhopadhyay and Laharee Chatterjee in Bengaluru; editing by Lisa Shumaker)

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    UnitedHealth Group posted stronger-than-expected earnings Tuesday in the first quarter without the bulk of its Affordable Care Act-compatible individual health-insurance business.

    The insurance giant earned $2.37 a share, higher than the $2.17 expected by analysts. It also generated $48.7 billion in revenue, higher than the $48.3 billion that analysts were anticipating.

    UnitedHealth also raised its guidance for both profit and revenue for the year. The insurer now sees full-year EPS of $9.65 to $9.85 a share, higher than the expected $9.51 a share.

    This was the first quarter in which UnitedHealth rolled back most of its plans from the exchanges established by the ACA, the healthcare law better known as Obamacare. The company said the rollback slowed revenue growth and the number of lives covered.

    "UnitedHealthcare's withdrawal from ACA Individual markets, combined with the 2017 health insurance tax deferral, reduced consolidated first quarter 2017 revenues by approximately $1.6 billion and lowered the revenue growth rate by 4.1 percent," the release from UnitedHealth said.

    The company also said it dropped 765,000 people through the ACA market, partially offsetting the addition of 1.5 million customers through other lines of business.

    Following the release, UnitedHealth's stock was up 2.25% in premarket trading to $170.95 as of 6:35 a.m. ET.

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    Even the CEO of the US' largest health insurer by number of people covered has no more insight into the tumultuous healthcare fight than anyone else, he told analysts during the insurer's first-quarter earnings call

    "It's probably not often we say this but if you really have actually been following the media with respect to healthcare policy, I would say the media has been very accurate with respect to the narrative that is going on there," UnitedHealth Group CEO Stephen Hemsley said.

    Hemsley also said UnitedHealth executives previously "engaged" with lawmakers about the details of the plan, but the American Health Care Act went through constant upheaval during its short lifespan.

    The AHCA underwent rapid transitions over its month-long existence, as leaders added provisions to try and make it more popular with conservative Republicans. In fact, at one point during the White House's attempt to revive the AHCA after the initial vote's failure, it appeared that the moderate and conservative sides of the House GOP conference were told two different things by Vice President Mike Pence, and no one was sure what was actually being proposed.

    With Congress on a two week recess, it appears that little progress has been made toward reviving the AHCA, despite the sizable Republican majority in both chambers of Congress.

    "So, if you're following the media, generally speaking, you would be up to speed," Hemsley told analysts. "We couldn't probably offer any more insights than that."

    The UnitedHealth CEO said the insurers' executives are committed to working with lawmakers and had some details they wanted included, but did not have any real update on the progress of the AHCA.

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    UnitedHealth Chief Executive Officer Stephen Hemsley takes part in a panel discussion titled

    (Reuters) - UnitedHealth Group Inc, the largest U.S. health insurer, reported a better-than-expected quarterly profit, driven by growth across its businesses and raised its full-year earnings forecast.

    The insurer's results comes after a second attempt to pass a healthcare legislation in the Senate collapsed late on Monday, with U.S. President Donald Trump calling for an outright repeal of Obamacare and others seeking a change in direction toward bipartisanship.

    UnitedHealth, which sells employer-based insurance as well as Medicare and Medicaid, said net earnings attributable to shareholders rose to $2.28 billion, or $2.32 per share, in the second quarter ended June 30, from $1.75 billion or $1.81 per share, a year earlier.

    Excluding items, UnitedHealth earned $2.46 per share, beating average estimate of $2.38, according to Thomson Reuters I/B/E/S.

    Revenue from the company's OptumRx business rose about 10 percent to $22.7 billion. OptumRx administers drug benefits for the company's insurance clients.

    Total revenue rose 7.7 percent to $50.05 billion, largely in line with estimates.

    The insurer said its withdrawal from Obamacare individual markets, combined with the health insurance tax deferral, reduced second-quarter revenue by about $1.8 billion and lowered the revenue growth rate by 4.5 percent.

    The company raised its forecast for 2017 net earnings to $9.20 to $9.35 per share and adjusted net earnings to $9.75 to $9.90 per share.

    UnitedHealth had earlier forecast earnings of $9.10 to $9.30 per share and adjusted earnings of $9.65 to $9.85 per share. (Reporting by Ankur Banerjee in Bengaluru; Editing by Shounak Dasgupta)

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    What if paying for a drug with insurance didn't cost you less, but made the drug more expensive?

    That's what a new lawsuit filed against CVS is alleging. The suit claims that the pharmacy agrees with pharmacy benefit managers, or PBMs — the middlemen of the industry that manage the list of what drugs an insurer will and will not pay for — to sell certain drugs at a higher price if a customer is paying with insurance.

    The lead plaintiff in the case is a woman named Megan Schultz, and she claims that she bought a generic medication at CVS that cost $165.68 under her insurance but would've cost only $92 had she paid in cash without using her insurance.

    Here's why, according to the complaint:

    • The PBMs can control which pharmacies are "in network" for their clients, the insurers.
    • Since CVS pharmacies want those sales from in-network patients, they offer the PBMs a cut of the drugs they're selling to those insured patients.

    What's more, Schultz says she had to find this out on her own because no one at CVS could legally give her a heads-up. From the complaint:

    "These agreements with PBMs are based on secret, undisclosed contracts, under which CVS agrees to specific amounts it will charge and collect from insured customers — but the customers can neither see nor learn about these agreements or their terms from the pharmacies, the insurance companies, or anyone else. The linchpin of the scheme is that the customer pays the amount negotiated between the PBM and CVS even if that amount exceeds the price of the drug without insurance."

    The suit also alleges that CVS pharmacies charge customers a "co-pay" that's instead additional money CVS shares that with the PBM. It works like this, according to the complaint:

    clawbacks CVS complaint

    CVS said the allegations were "built on a false premise" and "completely without merit." Here's a statement the company emailed Business Insider:

    "Co-pays for prescription medications are determined by a patient's prescription coverage plan, not by the pharmacy. Pharmacies collect the co-pays that are set by the coverage plans. Our pharmacists work hard to help patients obtain the lowest out-of-pocket cost available for their prescriptions. Also, our PBM CVS Caremark does not engage in the practice of co-pay clawbacks. CVS has not overcharged patients for prescription co-pays, and we will vigorously defend against these baseless allegations."

    The lawsuit claims that this doesn't happen with every prescription, just a select number. However, the drugs named in the suit — including Tamiflu, amoxicillin, and Viagra — are pretty common. You can see the full list here.

    Three large PBMs control about 80% of the market in the United States. One of them, Caremark, is owned by CVS, and another, OptumRx, is owned by UnitedHealth. The largest of all PBMs, though, and the only stand-alone one, is Express Scripts.

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    (Reuters) - UnitedHealth Group Inc said on Wednesday president David Wichmann will become the company's chief executive, succeeding Stephen Hemsley, who is moving to the newly created role of executive chairman after more than a decade at the helm of the largest U.S. health insurer.

    Wichmann, 54, was widely viewed inside and outside of the company as Hemsley's likely successor, although the timing of the change was sooner than some had expected.

    Under 65-year-old Hemsley, UnitedHealth became one of the biggest sellers of insurance plans on the exchanges created as part of former President Barack Obama's national healthcare law.

    However, mounting losses from the program prompted the company to largely exit from Obamacare plans in 2017.

    Current Chairman Richard Burke will become UnitedHealth's lead independent chairman, UnitedHealth said. The changes are all effective Sept. 1.

    Wichmann has spent nearly 20 years with the company and was previously its chief financial officer. He has long been in charge of the insurer's mergers and acquisitions.

    "Management is the single most important factor in our view of UnitedHealth - and with Hemsley staying in a very important operating/strategic role, we are very comfortable with this change," Mizuho Securities analyst Sheryl Skolnick wrote in a research note.

    As founder, Burke also remains on the board. "The guardians of the UNH galaxy are firmly in place," Skolnick said.

    The insurer reported a higher-than-expected quarterly profit last month, helped by its decision to abandon the Obamacare individual insurance market, amid uncertainty over the fate of the law under President Donald Trump's administration.

    Hemsley said in July he was optimistic about the business next year, but that national and state healthcare policies would be a possible drag on profit in 2018. Shares of the company have risen nearly four-fold since Hemsley took over the helm.

    UnitedHealth's shares were up 1.2 percent at $196.89 in light premarket trading on Wednesday. (Additional reporting by Akankshita Mukhopadhyay and Tamara Mathias in Bengaluru; Editing by Maju Samuel and Bill Rigby)

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    (Reuters) - UnitedHealth Group Inc, the largest U.S. health insurer, reported a stronger-than-expected quarterly profit and raised its full-year earnings forecast, helped by strength in its pharmacy benefit management business.

    UnitedHealth, the bellweather for the industry, is the first health insurer to report earnings a week after U.S. President Donald Trump decided to cut off subsidies to health insurance companies for low-income patients, his latest attempt to weaken predecessor Barack Obama's signature healthcare law.

    UnitedHealth had been immune to news involving Obamacare repeal efforts this year, in part as it largely pulled back from offering plans in the individual insurance exchanges due to mounting losses from the program.

    "UnitedHealth rarely misses a step: the debut quarter for its new CEO had to be a good one," Mizuho Securities analyst Sheryl Skolnick wrote in a client note. The health insurer in August named David Wichmann its new chief executive.

    UnitedHealth, which sells employer-based insurance as well as Medicare and Medicaid, said net earnings attributable to shareholders rose 26.3 percent to $2.49 billion, or $2.51 per share, in the third quarter ended Sept. 30. (http://bit.ly/2hK3mGr)

    Excluding items, the company earned $2.66 per share, beating the average analyst estimate of $2.56 per share, according to Thomson Reuters I/B/E/S.

    Revenue from its Optum business, which manages drug benefits and offers healthcare data analytics services, rose 8.4 percent to $22.89 billion, accounting for nearly half of the insurer's total revenue.

    UnitedHealth's total revenue rose 8.7 percent to $50.32 billion, but narrowly missed analysts' estimate of $50.35 billion.

    The insurer said its withdrawal from individual insurance markets, combined with a health insurance tax deferral, reduced third-quarter revenue by about $1.6 billion and lowered the revenue growth rate by 4 percent.

    "Despite a top-line hit of $1.6 billion ... UnitedHealth beat ... likely means a positive read-through for 2018," Mizuho's Skolnick said.

    The company's medical care ratio, or the percentage of premiums paid out for medical services, increased to 81.4 percent from 80.3 percent.

    The medical care ratio is 100 basis points lower than Mizuho's estimates, Skolnick said, adding that the cost trends remain favourable for UnitedHealth.

    The company raised its full-year adjusted earnings forecast to about $10.00 per share, from $9.75-$9.90.

    UnitedHealth's shares were up 1.4 percent at $196 in light premarket trading. (Reporting by Divya Grover in Bengaluru; Editing by Savio D'Souza, Anil D'Silva and Maju Samuel)

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