September 11th, 2019 by
Trefis Team
UnitedHealth Group (NYSE:UNH) is the
largest health insurance company in the United States. Through its
UnitedHealthcare and Optum subsidiaries, it provides individual insurance,
employer sponsored health insurance, managed care, health and wellness
services, healthcare advisory & technology solutions and pharmacy benefits
management services. The end users include retail customers, pharmacies,
doctors, hospitals & health care centers, employers and government.
Further, its business model faces stiff challenges and competition from
offerings by its global competitors such as Humana, Aetna, Cigna and WellPoint.
Trefis details the key
components of UnitedHealth’s Revenues in an
interactive dashboard, along with our forecast for the next three years. While
net revenues have grown at an average annual rate of 11% over the last three
years, we expect the growth rate to slow down in coming years. Further,
UnitedHealth’s net revenues are expected to increase from $226.2 billion in
2018 to $275.8 billion by 2021, mainly driven by growth in UnitedHealthcare
Medicare & Retirement segment. You can make changes to our forecast for
individual revenue streams in the dashboard to arrive at your own forecast for
the company’s revenues. Additionally, you can see more Trefis data for Heath Care companies here.
[A] UnitedHealthcare
Medicare & Retirement revenues are expected to cross $97.5
billion by 2021
·
This segment provides
healthcare services, primarily to individuals aged 65 or older, and is
UnitedHealth’s largest segment in terms of revenues.
·
Although Medicare
enrollments have grown at an average annual rate of 5% over 2016-2018, we
expect the growth rate to slow down in the coming years.
·
Further, strong growth
of monthly Medicare premiums is expected to continue in the subsequent years,
leading it to cross $539 by 2021
·
This should help
segment revenues grow at an average annual rate of 9% and cross $97.5 billion
by 2021.
[B] UnitedHealthcare Employer &
Individual revenues have struggled over the last three years.
·
This segment offers
individual insurance and employer-sponsored health insurance plans for
employees
·
The lackluster
performance over the last three years can be attributed to a drop in the number
of policyholders from 30.6 million in 2016 to 26.9 million in 2018. However, we
expect the numbers to improve in subsequent years and cross 27.5 million by
2021.
·
Average monthly health
insurance premiums increased by 17% y-o-y in 2018. Further, it is expected to
grow at an average annual rate of 2% and cross $183 by 2021.
·
This implies an
average annual rate of 3% in segment revenues – helping the figure cross $60.3
billion by 2021.
[C] UnitedHealthcare
Community & State is expected to grow at a slower pace over
the next three years.
·
This division provides
managed care solutions and insurance coverage to beneficiaries under the U.S.
government’s Medicaid program.
·
It reported a 14% jump
in Medicaid enrollments in 2017, before it dropped by 4% in 2018. We expect the
enrollments to recover in coming years and cross 7 million by 2021.
·
Average monthly
Medicaid premiums are expected to grow at an average annual rate of 3% over the
next three years – from $561 in 2018 to $610 by 2021.
·
This should result in
segment revenues reaching $51.4 billion by 2021.
[D] UnitedHealthcare
Global has added 2 million enrollments over 2016-2018, however it
is expected to add only 400K over the next three years
·
This segment provides
healthcare services to governments, corporates and individuals in more than 130
countries, with a strong presence in Brazil.
·
International
enrollments are expected to grow at a slower pace over the next few years –
from 6.2 million in 2018 to 6.6 million by 2021.
·
This implies that
segment revenues will likely increase to roughly $10.8 billion by 2021.
[E] Optum
Health revenues are expected to cross $33.3 billion by 2021
·
It offers health and
wellness services to individual, business and government customers
·
The segment revenues
have increased by 43% over the last three years, from $16.9 billion in 2016 to
$24.1 billion in 2018. Further, we expect the same trend to continue in
subsequent years.
[F] Optum
Insight revenues would cross $10.8 billion by 2021
·
It deals in software
products along with information, advisory and outsourcing services for
healthcare industry
·
The segment revenues
have grown at an average annual rate of 11% over 2016-2018. However, we expect
the growth rate to reduce by half in the subsequent years.
[G] OptumRX revenues
are expected to increase by 22% over the next three years.
·
This segment is
responsible for processing and paying prescription drug claims of its clients
·
Number of retail
prescriptions has seen steady growth over 2016-2018. We expect the same trend
to continue and help the figure to increase by 200 million in the next three
years.
·
At the same time,
revenue per retail prescription would appreciate by 12% over the same period.
·
This would enable the
segment revenues to maintain its current momentum and cross $84.6 billion by
2021 – consolidating its position as the second largest division for the
company in terms of revenues.
[H] Eliminations are
deducted from Gross Revenues to calculate Net Revenue figure. UnitedHealth
reported Eliminations of $59.9 billion in 2018.
·
Due to the overlapping
nature of UnitedHealth’s revenue streams, certain revenue components are
included in more than one segment. These overlapping components are categorized
as Eliminations.
·
Eliminations are
expected to increase by 22% (about $13.1 billion) in the next three years,
while its share of Gross Revenues would remain the same.
Trefis estimates UnitedHealth’s stock (shows cash and
valuation analysis) to have a fair value of $293, which is 25% higher
than the current market price. Our price estimate incorporates changes to our
forecast based on UnitedHealth’s earnings release last
month.
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