Health insurers are a big winner during long-running bull market 

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Government plans have been one of the growth drivers for the nation’s largest insurer, UnitedHealth Group, which is up 19 percent year to date, and has seen shares gain nearly 1400 percent over the last nine years.

United’s health plan membership has grown from 32 million to nearly 50 million over the last nine years; its Medicaid and Medicare membership has more than doubled, during the period.

But new business segments outside of health insurance have a played big role in growing the health-care giant’s annual revenues from $87 billion in 2009 to an estimated $225 billion this year. The health services and products under the Optum division have become a key driver of top-line growth.

“They diversified and started gaining non-insurance businesses,” said Deep Banerjee, health-care credit analyst at Standard & Poor’s.

United’s Optum unit now accounts for 20 percent of revenues, and includes data analytic services, pharmacy benefit management, physician practices and outpatient surgical centers.

Banerjee notes that revenues from the services businesses are not subject to the ACA regulatory caps, which require insurers to spend at least 80 percent of premium revenues on medical care. That makes them more profitable.

“As the non-regulated cash flows have increased (for insurers) … the investment community has taken a more of a liking to them,” said Banerjee.

United’s success has been part of the impetus behind the increasing number of vertical health insurer deals. More health plans have acquired health-care providers and services in order to have greater control over medical costs in their health plans.

Pharmacy benefit giant CVS Health’s $69 billion deal for Aetna and Cigna’s $54 billion deal to buy pharmacy benefit firm Express Scripts are both predicated on trying to driving cost efficiencies by having greater control over a wider range of members’ care.

For both mergers, diversification of revenues could serve as a bulwark against potential new regulation of pharmacy benefit rules as the Trump administration has pledged new reforms for curbing high drug costs.



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