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Despite Early ACA Costs, UnitedHealth Will Expand Obamacare Business In 2015

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The nation’s largest health insurance company, UnitedHealth Group (UNH), said its first-quarter earnings dipped slightly due to costs and fees related to the Affordable Care Act, but the company sees growth from the law and is looking to expand its offerings on government-run exchanges next year.

UnitedHealth projects its revenue to grow five percent this year to a “range of $128 billion to $129 billion” as it gains new customers from newly insured customers under the health law via exchanges, expanded Medicaid health programs for the poor and its Medicare Advantage business, which provides health benefits to seniors in contracts with the federal government.

In the quarter, net earnings fell to $1.1 billion, or $1.10 per share, compared to $1.19 billion, or $1.16 per share in the first quarter largely due to new costs and “ACA reinsurance fees.” In the first quarter alone, UnitedHealth said earnings were negatively impacted by 30 cents per share in new taxes and regulatory costs

Like most other insurance companies, UnitedHealth is projecting profits to suffer in the first year the company is offering health plans on government-run exchanges known as marketplaces. UnitedHealth is participating in a dozen exchanges this year and isn’t ruling out expanding to more markets for 2015.

“It is still very, very early in the life of the exchanges,” UnitedHealth CEO Stephen Hemsley said during a 70-minute conference call with Wall Street analysts and investors.

UnitedHealth executives said they don’t have to commit to new markets for 2015 until September and is currently looking at other markets, examining potential markets and health care provider networks it would use for any exchange offerings.

“At this stage, our bias is to increase our participation,” said Gail Boudreaux, chief executive officer at UnitedHealthcare,  UnitedHealth’s primary health insurance subsidiary.

UnitedHealth’s competitors have seen the expansion of health benefits as a potential boon. Humana (HUM), Wellpoint (WLP) and an array of mutually-owned and nonprofit Blue Cross and Blue Shield plans are participating in many more markets than UnitedHealth.

Early enrollment is to the insurers’ financial benefit and the Obama administration has said the first open enrollment period, which ended March 31, exceeded its goals.

U.S. Secretary of Health and Human Services Kathleen Sebelius said last week that more than 7.5 million people signed up for private coverage via state or federally run marketplaces under the Affordable Care Act.  And she projected the number to rise.