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Products: UnitedHealth Group Incorporated (UNH)

Medicare(Medicare)
OptumHealth(OptumHealth)
OptumRx Prescriptions(OptumRx Prescriptions)
OptumInsight Consulting(OptumInsight Consulting)
Medicaid Managed Care(Medicaid Managed Care)
Private Health Insurance(Private Health Insurance)
United HealthCare International(United HealthCare International)

Medicare

What is being offered?

United HealthCare Medicare and Retirement provides healthcare services, primarily to individuals aged 65 or older. Its products and services offerings can be classified in the following segments:

  • Medicare Advantage: United HealthCare Medicare and Retirement provides health care insurance plans to senior citizens and other eligible beneficiaries administered by the Centers for Medicare and Medicaid Services(CMS). It provides coverage in return for a fixed monthly premium per member served from CMS. Premium amounts are determined by factors such as area of residence, demographic factors like age and gender in addition to the individual's health condition.
  • Medicare Supplement: These plans generally cover healthcare costs incurred by beneficiaries and the amount paid by Medicare.
  • United HealthCare Medicare and Retirement provides a range of different health insurance plans to American Association of Retired Persons (AARP) members and uses the AARP brand to market its Medicare-related product offerings.
  • It also provides Medicare Part A services, which include hospital care services; Medicare Part B services, which cover out-patient services like physician visits; and Part C services, which combine features of both for state-administered Medicare programs.
  • Prescription Drug Benefits (Medicare Part D): It provides Part D prescription drug coverage through its Medicare Advantage program as well as stand-alone Part D plans. This business is further integrated through the Optum Rx division.

Who is buying?

These services are bought on a contract basis by the Centers for Medicare and Medicaid Services (CMS) and the American Association of Retired Persons (AARP). Members and beneficiaries then access these services according to their needs and eligibility.

Competitors:

Direct competitors of United HealthCare Medicare and Retirement include Wellpoint, Aetna and Humana. There are many other companies in this sector which provide similar services either for profit or not for profit.

What buyers care about:

  • Cost effectiveness of services.
  • Customization of plans.
  • Company's expertise in providing these services.

Top selling points:

United HealthCare has a huge network of care providers which makes it a leader in this domain. Also, it has specialized services in its Optum divisions which help in customizing services. For example the Medicare Part D service is integrated with the company's Optum Rx division.

Units, pricing and margins

UnitedHealth served about 13.8 million Medicare beneficiaries in 2017, which includes AARP members. The company receives monthly premiums, with an average monthly premium of about $364. UnitedHealthcare division (which includes private insurance, Medicaid and Medicare) EBITDA margins are around 6%. We expect them to remain stable going forward despite the restrictions from the Patient Protection and Affordable Care Act (PPACA).

UNH's Monthly Medicare Premiums Per Enrollment

This represents the monthly premiums the company earns per Medicare enrollment.

UNH's Monthly Medicare Premiums Per Enrollment has increased steadily, from $294 in 2008 to $400 in 2016 as medical costs have risen. There have been minor fluctuations historically as the company's enrollment mix can vary from year to year (total enrollments include Medicare Advantage, Medicare Part D and standalone Medicare Supplement, which have varying cost levels).

Chart: UNH's Monthly Medicare Premiums Per Enrollment

OptumHealth

What is being offered?

OptumHealth provides health and wellness services to individual, business and government customers. Its services are organized in five operating divisions:

  • Behavioral Solutions: Provides well-being services to over 50 million customers. These services include employee assistance programs, disability solutions, and mental health and substance abuse solutions which include risk identification, targeted programs and therapy.
  • Care Solutions: Provides personalized health management services such as benefit and claims support education for employees, cost estimates and analysis for health plans, specialized programs for conditions such as asthma and diabetes, women's health services, and wellness programs such as fitness reimbursements and health discount programs.
  • Financial Services: OptumHealth Bank provides Flexible Spending Accounts, which allow employees and employers to deposit part of pre-tax income and get tax advantages and health savings in the future, as well as Health Savings Accounts and other accounts such as retiree accounts and health reimbursement accounts. These accounts provide tax advantages and allow customers to save for future health costs. It also provides electronic payment solutions, allowing electronic payments to doctors and other providers, and loss insurance to employers who self-fund employee healthcare.
  • Collaborative Care: Allows physicians to connect to one another and access health services information through electronic health records, web portals, and videoconferencing.
  • Logistics Health Inc: This business was acquired in 2011 and provides mobile care delivery, allowing for easy access to services such as treatments, immunizations and disability exams for military, government and commercial customers

Who is buying?

These various services are used by employers (particularly human resources departments and employers who self-fund employee healthcare), government and military customers, as well as care providers such as hospitals and physicians. The Behavioral Solutions unit serves over 50 million individual customers, while Care Solutions serves over 40 million.

Competitors:

Its principal competitors in Behavioral Solutions include Horizon Health Corporation, Magellan Health Services and Universal Health Services, while Care Solutions competes with Aetna, Humana and others. OptumHealth Bank competes with U.S. Bank and Chase Banks among others.

What buyers care about:

  • Cost saving on services.
  • Industry expertise
  • Ease of access to services
  • Quality of treatment
  • Products and tax advantages offered (OptumHealth Bank)

Top selling points:

The company has a vast network of more than 67,000 pharmacies, over 100,000 physicians in about 6,600 locations. This allows it to offer very specialized and convenient care. It also has access to proprietary software, databases and records through Optum Insight which allows it to further specialize its services.

Units, pricing, margins

OptumHealth generally charges a fixed fee per individual served. These services are offered on a risk basis, whereby the company assumes the risk of health costs in exchange for the fixed monthly fee. The company serves over 50 million Behavioral Solutions customers and 40 million Care Solutions customers. OptumHealth's EBITDA margins improved from 7.2% in 2011 to 10.2% in 2017. We expect margins to remain in this range throughout our forecast period.

Revenue from OptumHealth

This represents United Health's total revenues generated by the Optum Health division.

Revenue from OptumHealth declined steadily from 2008 through 2010 primarily due to the economic downturn. However revenues increased 47% in 2011 to $6.7 billion largely due to acquisitions in the clinical services domain like Connextions and strong growth in consumer health management services. The figure jumped to $16.9 billion by 2016 on the back of expanding customer base helped by UnitedHealth's existing customers from other business lines.

Chart: Revenue from OptumHealth

OptumRx Prescriptions

What is being offered?

OptumRx provides a range of pharmacy benefits management (PBM) services, which means that it is responsible for processing and paying prescription drug claims of its clients. It serves more than 66 million people nationwide. It also provides PBM services across nearly all of UnitedHealth's businesses, as well as for external parties such as Medicare-contracted plans and Medicaid plans.

The revenue stream of this business is similar to wholesale businesses. The company provides pharmacies a good number of customers and negotiates prescription costs and processes these prescriptions for its customers.

Who is buying?

The buyers of these services include

  • Individuals, especially senior citizens
  • Employers
  • Managed care service providers

Competitors:

Its direct competitors are Medco Health Solutions, CVS Caremark and Express Scripts.

What buyers care about:

  • Ease of settlements
  • Network of pharmacies covered
  • Drugs covered in the settlement plan

Top selling points:

It has a vast network of 67,000 retail pharmacies, 2 mail service facilities to easily address the needs of its consumers across the country.

Units, pricing and margins

The company filled nearly 1.3 billion retail prescriptions in 2017, with an average revenue per filled prescription of $49. This is a very low-margin business, as it is similar to a wholesale business. EBITDA margins are generally in the 4-5% range.

Total U.S. Retail Prescriptions Filled

This refers to the total number of prescriptions filled in the U.S. annually by drugstores (both chain and independent), mass merchant outlets, supermarket pharmacies and mail order pharmacies.

Retail Prescriptions Filled Annually in the U.S. increased by 2% from about 3.825 billion in 2007 to more than 4 billion in 2011. It sustained the growth rate to cross 4.38 billion in 2016.

Chart: Total U.S. Retail Prescriptions Filled

OptumRx's Revenue Per Retail Prescription

This represents Optum Rx's average revenue earned per prescription it processes as a Pharmacy Benefits Manager which includes its retail, mail service and specialty drug prescriptions.

OptumRx's Revenue Per Retail Prescription from $51.90 in 2012 to $91 in 2016.

Chart: OptumRx's Revenue Per Retail Prescription

OptumRx's Retail Prescription Market Share

This refers to Optum Rx's prescriptions filled as a percentage of total U.S. prescriptions filled.

OptumRx's Retail Prescription Market Share increased steadily from 7.8% in 2007 to 9.2% in 2011. This was driven largely by an increase in Medicare Part D prescriptions filled through UnitedHealth's Medicare segment. OptumRx's Retail Prescription Market Share, however, declined slightly in 2012 as UnitedHealth lost some of the regions due to higher bid. However, this was reversed when in 2013 the company bounced back as the company completed the inclusion of UNited HealthCare's 12 million customers to the pharmacy services offered by OptumRx. Since then it has grown to about 14% in 2016.

Chart: OptumRx's Retail Prescription Market Share

OptumInsight Consulting

What is being offered?

This is UnitedHealth Group's consulting and advisory division, which provides software and information products and services as well as advisory and outsourcing services to clients. Its services are primarily in the following segments:

  • Provider: Advises care providers like hospitals and physicians with respect to finance and operations management, compliance and payment models. Its Health Information Exchange solutions allow for data and records sharing and is used by over 50,000 physicians.
  • Payer: Advises commercial health providers as well as Medicaid and Medicare administrators about provider network management, operational efficiency and risk management.
  • Government Solutions: Advises state and federal governments on provider payment efficiency, fraud detection, population analytics and network performance.
  • Life Sciences: Assists biotechnology, pharmaceutical and medical device companies in product development, pricing strategy, regulatory strategy, risk management and patent advisory.

Who is buying?

Optum Insight provides its services to: Physicians, hospitals, life sciences companies, healthcare providers, and governments.

Competitors:

Some of its competitors are Active Health Management, Affiliated Computer Services and Argus Health, which provide similar services to clients.

What buyers care about:

  • Price of the services provided
  • Expertise of the company
  • Around the clock support service
  • Efficiency in results and turnaround times

Top selling points:

Optum Insight has a significant client base, the benefit of being integrated with the market-leading health insurance provider and advanced tools which analyze about 1 million claims per day.

Units, pricing, margins

The company generally provides these services under long-term contracts, generally several years. The company maintains a healthy backlog and as a result there is good near-term revenue visibility. The company's backlog is about $10.4 billion, compared to about $6 billion of annual revenues (2017). Optum Insight's margins are generally in the 21-22% range, and we expect them to improve to about 25% going forward.

Revenue from OptumInsight

This represents the total revenues generated by Optum Insight by the sale of Information and Technology products and services, advisory consulting services and outsourcing services to its clients.

Historically Optum Insight's we have seen the revenues from this business of United Health Group grow from $1.3 billion in 2007 to $2.7 billion in 2011 due to increased demand in this sector, product innovation and some acquisitions. Revenue from OptumInsight further increased to over $4.2 billion in 2012 and stood at $7.3 billion in 2016.

Chart: Revenue from OptumInsight

Medicaid Managed Care

What is being offered?

This division provides managed care solutions and insurance coverage to Medicaid beneficiaries. Medicaid is a U.S. government program which provides healthcare primarily for economically disadvantaged, medically underserved people and those without the benefit of employer benefit plans. These members are identified by states, and are eligible for state-run Medicaid and other health care programs. Medicaid is financed by individual states and the federal government, which matches state spending.

Managed care is a program through which Medicaid beneficiaries receive coverage through a private managed care organization (MCO) such as UnitedHealth. In return for the services and coverage provided, the insurer receives a monthly premium per member from the applicable state. UnitedHealth serves beneficiaries of a range of plans like acute and long-term Medicaid plans, Children's Health Insurance Plans(CHIP), Special Needs Plans and other federal and state health care programs.

Who is buying?

These services are bought by state-run Medicaid and other community-based programs either through a formal bidding process or on an individual contract basis.

Competitors:

Its direct competitors include WellPoint, Humana and Aetna. There are many other companies in this sector which provide Medicaid services.

What buyers care about:

  • Cost effectiveness of the services and products offered.
  • Convenience of processes for its beneficiaries i.e. the ease with which beneficiaries can access these services.
  • Company's expertise in providing these services

Top selling points:

United HealthCare has a huge network of care providers which makes it a leader in this domain. Also, it has very specialized services in its Optum divisions which helps in providing customized services according to beneficiaries' needs.

Units, pricing and margins

UnitedHealth served over 6.7 million Medicaid managed care recipients in 2017. The company receives monthly premiums from states, with an average monthly premium of nearly $427. UnitedHealthcare division (which includes private insurance, Medicaid and Medicare) EBITDA margins are around 6%. We expect them to decline going forward due to restrictions from the Patient Protection and Affordable Care Act (PPACA).

UNH's Monthly Medicaid Premiums Per Enrollment

This represents the Medicaid premiums that UnitedHealth receives each month per managed care enrollment.

UNH's Monthly Medicaid Premiums Per Enrollment have increased steadily from $389 in 2014 to $466 in 2017 as the company raised rates in response to increases in medical care costs.

Chart: UNH's Monthly Medicaid Premiums Per Enrollment

Private Health Insurance

What is being offered?

United HealthCare Employment and Individual Insurance division provides insurance plans for individuals as well as employers who take care of their employees' health insurance plans. It provides two kinds of services:

  • Commercial risk-based: In providing risk-based services. United HealthCare covers the risk associated with medical as well as administrative costs within the premiums it receives from its customers.
  • Commercial fee-based: Within this category of services, United HealthCare only provides administrative and managerial services to its customers. Fee-based customers are generally larger companies which decide to self-fund healthcare costs of their employees and their dependents. While providing these services, United HealthCare receives a fixed service fee per individual served.

This division also provides a range of other specialized services like clinical plans, disease-specific management services and other services which are integrated with its subsidiaries in the Optum division.

Who is buying?

The buyers of these services are of two kinds:

  • Individuals use these services to take care of their personal and dependents' healthcare needs.
  • Companies use these services to take care of their employees' health care needs. Larger companies which self-fund their employees' medical costs buy fee-based services.

Competitors:

Its largest competitors include WellPoint, Humana and Aetna. There are many other companies in this sector as well.

What buyers care about:

  • Cost effectiveness of the plans.
  • Nature of the plans i.e. customization according to one's personal needs.
  • Ease of reimbursement of bills.
  • Type and network of care providers (hospitals, physicians, etc.) covered.

Top selling points:

UnitedHealth has a huge network of care providers and hospitals which makes it an attractive option for its customers. Customers get access to 97% of the hospitals and 90% of the physicians in the network (the remainder is available only for Medicare and Medicaid beneficiaries). United HealthCare is the market leader in this segment so it gets greater power to negotiate with hospitals on medical costs, which helps in designing cost-effective plans for its customers.

Units, pricing, margins

The company has over 30 million private health insurance enrollments. The company receives monthly premiums, with an average monthly premium of nearly $130 (though this includes the lower-cost, fee-based policies). UnitedHealthcare division's (which includes private insurance, Medicaid and Medicare) EBITDA margins are around 6%. We expect them to decline going forward due to restrictions from the Patient Protection and Affordable Care Act (PPACA).

Monthly Health Insurance Revenue Per Enrollment

This represents the monthly revenues that United Health Group earns per private insurance enrollment. We calculated it as the company's total private insurance revenues divided by total private enrollments, divided by 12.

It is not necessarily indicative of the company's exact pricing for comprehensive, risk-based policies, as total enrollments include fee-based policies, which have much lower premiums (as UnitedHealthcare is just the administrator and does not assume the risk for medical payments). The figure is therefore driven not only by rate changes, but also by the mix of risk-based vs. fee-based enrollments.

Monthly Health Insurance Revenue Per Enrollment increased from $119 in 2014 to $145 in 2016 due to the Affordable Care Act.

Chart: Monthly Health Insurance Revenue Per Enrollment

United HealthCare International

What is being offered?

United HealthCare International division contains business from Amil S.A., Brazil's largest managed care provider. Amil provides health insurance and dental care plans for individuals as well as employers who take care of their employees' health insurance plans. It charges them a monthly fees, which is established at the beginning of the plan according to the risk profile, and then adjusted annually.

Who is buying?

The buyers of these services are of two kinds:

  • Individuals use these services to take care of their personal and dependents' healthcare needs.
  • Companies use these services to take of their employees' health care needs. Larger companies which self-fund their employees' medical costs buy fee-based services.

Competitors:

Its largest competitors include Bradesco and Intermedica. There are many other companies in this sector as well.

What buyers care about:

  • Cost effectiveness of the plans.
  • Nature of the plans i.e. customization according to one's personal needs.
  • Ease of reimbursement of bills.
  • Type and network of care providers (hospitals, physicians, etc.) covered.

Top selling points:

UNH acquired Amil S.A., Brazil's largest managed care provider to foray into international market. The company has the largest accredited provider network with approximately 3,300 hospitals, 54,900 healthcare clinics and private practices and and 11,700 laboratories and diagnostic imaging centers, which makes it an attractive option for its customers. Amil is the market leader in this segment so it gets greater power to negotiate with hospitals on medical costs, which helps in designing cost-effective plans for its customers.

Units, pricing, margins

The company has over 4 million health insurance enrollments (2017). The company receives monthly premiums, with an average monthly premium of nearly $112 (though this includes all the plans). EBITDA margins (which include U.S. private insurance, Medicaid, Medicare and International insurance business)are around 6%. We expect them to decline going forward due to restrictions from the Patient Protection and Affordable Care Act (PPACA).

UNH's Average Monthly International Premiums

This represents the monthly revenues that United Health Group earns per international insurance enrollment. We calculated it as the company's total international revenues divided by total international enrollments, divided by 12.

It is not necessarily indicative of the company's exact pricing for comprehensive, risk-based policies, as total enrollments include fee-based policies, which have much lower premiums (as UnitedHealthcare is just the administrator and does not assume the risk for medical payments). The figure is therefore driven not only by rate changes, but also by the mix of risk-based vs. fee-based enrollments.

UNH's Average Monthly International Premiums was $111 in 2013 and increased to $123 in 2016.

Chart: UNH's Average Monthly International Premiums

United HealthCare's International Enrollments

This amount represents the total number of enrollments in UNH's international business.

UNH announced the acquisition of Brazilian insurer Amil in October 2012. United HealthCare's International Enrollments were 4.4 million in 2012 and 4.22 million in 2016.

Chart: United HealthCare's International Enrollments