Watch CBSN Live

In an early sign of Obamacare's impact, an insurer sees lower profit

The impact of the Affordable Care Act on consumer pocketbooks and tax coffers has been hotly debated, but now there's another datapoint to digest: How it is affecting private insurers' corporate profits.

UnitedHealth Group (UNH), one of the country's largest insurers, on Thursday said its first-quarter profits were weighed down partly thanks to Obamacare. It's one of the first big for-profit health insurers to report its results for the first three months of 2014, when insurance bought through the ACA's health-care exchanges went into effect.

First-quarter earnings declined almost 8 percent to $1.1 billion when compared with the year-earlier period, although sales rose 4.5 percent. It's not unusual for a company to report lower profits, but what makes UnitedHealth's report interesting is that it also disclosing how Obamacare is impacting its bottom line: The law cut its per-share earnings by more than 35 cents and will lower full-year profits by about $1.50 per share.

"This was really the first quarter of full scale operations under the ACA. Everything else in the past three years has been more of a preamble," UnitedHealth chief executive Stephen Hemsley said on an investor conference call. "The ACA's impacts on 2014 have been immediate and significant."

UnitedHealth's earnings report comes on the heels of President Barack Obama's announcement that 8 million Americans had signed up for private insurance through the marketplaces.

"This thing is working," the president said.

That might not be a sentiment that shareholders in for-profit insurers agree with. Shares of UnitedHealth had lost 3.08 percent at the close of trading Thursday (markets are closed on Friday in observance of Good Friday). Other private insurers, such as WellPoint (WLP) and Aetna (AET) also declined.

Of course, there's probably not much weeping going on for health insurers from the average consumer. After all, stories abound of sky-high premiums, without much in the way of actual health care coverage. Take writer Elizabeth Hand, who notes in Salon that she went from a monthly policy with a $466.35 premium and a $15,000 deductible to one that costs less than $52 per month and carries a $1,500 deductible.

For insurers, the law can cut profits partly because it changes their client mix, given that Obamacare bans insurers from excluding customers with pre-existing conditions or from charging sick patients more. It also ends the practice of charging more for women, a widespread business practice.

And to be sure, Obamacare wasn't the only reason for UnitedHealth's depressed earnings. The company cited a new hepatitis C treatment as providing another hit to the bottom line. Called Sovaldi, the drug is effective, but also incredibly expensive, given its cost of $1,000 per day.

"Patients were treated across the Medicaid, commercial and Medicare Part D categories at a cost of more than $100 million to us in the quarter," Hemsley noted on the conference call.

Still, Hemsley expressed optimism about the industry's long-term forecast, noting, "We continue to more clearly see evidence of the growth opportunities ... as we move beyond the more negative, immediate-term impacts of the ACA and its implementation."

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.