Analysts Say ACA Likely Will Boost Insurers’ Q3 Earnings

Analysts expect publicly traded health insurers to report large third-quarter earnings, in part because of provisions in the Affordable Care Act, Modern Healthcare reports.

Stakeholders said the financial reports would provide additional information on how the ACA's coverage expansion -- including the Medicaid expansion -- is affecting the number of patients who see providers.

Meanwhile, the financial reports also will show how the ACA's risk adjustment, risk corridor and reinsurance provisions are helping insurers to compensate for financial risks and increased use of services from individuals enrolled through the insurance exchanges. Leerink Partners analyst Ana Gupte said accounting for such provisions tends to be "more skewed toward the second half of the year," which would include the third quarter.

According to Gupte, early financial returns indicate that while a May Standard & Poor's report predicted that health plans likely would lose money from Medicaid expansion initially, the profit margins from the expansion appear "better-than-expected."

In addition, analysts have said the third-quarter reports will reveal how the law's insurance exchanges are affecting insurers' business strategies.

UnitedHealth Group Q3 Report

UnitedHealth Group, the largest health insurer in the U.S., was the first to post its third-quarter results. According to Modern Healthcare, the insurer is a bellwether for all other insurers, although its results do not necessarily indicate other insurers' financial standing.

UnitedHealth reported increases in profit and revenue compared with last year, adding that "medical utilization remained restrained."

Citigroup analyst Carl McDonald said a potential takeaway from UnitedHealth's financial report was that the "medical-cost trend is tame and that results will be strong across the group" (Herman, Modern Healthcare, 10/27).