), the largest private health insurance provider in the U.S., has
announced its exit from the California individual health insurance
market, following a similar decision by Aetna. The company
expressed concerns about regulatory challenges regarding premium
rate increases in California in its last annual report and had a
very small presence in the state. Private health insurance or
Employer & Individual insurance is UnitedHealth's biggest
business, accounting for 35% of the company's revenues and 38% of
its EBITDA. Please refer to our article:
A Look At UnitedHealth's Private Health Insurance
for detailed analysis on this division.
In other news related to the company, The Obama administration
has delayed the employer mandate of its healthcare act giving
companies with 50 or more employees time till 2015 to provide
affordable insurance to their employees. ((
Health-Law Employer Mandate Delayed by U.S. Until
, Bloomberg)) A recent report by the White House suggests that 96%
of all firms in the U.S. with 50 or more employees already offer
health Insurance to their employees and this announcement will have
little effect on our forecast for the company. Firms with less than
50 employees that are exempt from the PPACA requirement, employ 34
million workers in the U.S.
Our current price estimate for UnitedHealth stands at $70,
implying a 10% premium to the current market price.
See Full Analysis For UnitedHealth Group Here
UnitedHealth has a very small presence in California, with a
market share of just 1.1% and just 8,000 of its 27 million
policyholders residing in the state. The Patient Protection and
Affordable Care Act (PPACA) requires health insurance companies to
accept all individual applicants without considering their medical
history. Given the small market share that UnitedHealth had in
California, this requirement made the individual business unviable.
The company also faced competitive disadvantage in the state due to
special tax break given by the state to Anthem Blue Cross and Blue
WellPoint is the largest health insurer in California, with a
market share of 47% while Blue Shield is second with a market share
of 21%. UnitedHealth and Aetna will still cater to the employer
health insurance market in California.
The PPACA requires health insurance exchanges to be established
in each state in the U.S., allowing individuals and businesses to
compare policies and premiums, and chose the one best suited for
them . We expect the establishment of exchanges, coupled with
strong competition from companies like Cigna and Wellpoint to lead
to a long term decline in market share for UnitedHealth. However,
growth in the overall market will also benefit UnitedHealth,
leading to an increase in policyholders from about 27 million to
close to 30 million.
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