UnitedHealth unites its health plans with consumers across the US. As a leading health insurer, it offers a variety of plans and services to group and individual customers nationwide. Its UnitedHealthcare health benefits segment manages health maintenance organization (HMO), preferred provider organization (PPO), and point-of-service (POS) plans, as well as Medicare, Medicaid, state-funded, and supplemental vision and dental options. In addition, UnitedHealth's Optum health services units --
UnitedHealth operates through four reportable segments -- UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx.
UnitedHealthcare, the core health benefits segment, is king, accounting for about 65% of annual revenues. Its largest business is the Employer & Individual unit, which serves about 30 million members through its plans for students, families, individuals, and businesses (ranging from sole proprietorships to multinational enterprises). The Medicare & Retirement senior services unit is the second-largest business. A smaller division, Community & State, manages public Medicaid programs for disabled and disadvantaged citizens. Military & Veterans provides medical plans for about 3 million active and retired military personnel and their families in the western US through a government TRICARE contract. Finally, the Global unit serves international markets and includes
The Optum health services segments are OptumHealth (about a quarter of total revenues), OptumRx (another 10%), and OptumInsight (some 5%). OptumHealth is the health and wellness arm serving more than 90 million individuals, while OptumInsight provides technology and consulting services to the health care industry. OptumRx is a pharmacy benefit management (PBM) company that processes hundreds of millions of drug prescriptions annually and manages billions of dollars' worth of pharmaceutical spending each year.
UnitedHealth's plans have a combined provider network of some 1 million doctors and 6,000 hospitals nationwide. Its health plan units and other divisions serve customers throughout the US, as well as in 130 international countries.
Sales and Marketing
UnitedHealth's insurance products are largely sold through independent brokers and consultants, as well as through a direct sales force. Optum Rx's network includes more than 67,000 retail pharmacies and a number of home delivery facilities throughout the US.
UnitedHealth's revenues have been steadily rising for the past five years. In 2017 revenue increased 9% to $201.2 billion as premiums, services, and investment income grew. The company gained an additional 1.1 million domestic customers that year. As such, premium income rose significantly, both for UnitedHealthcare and OptumHealth, resulting in a combined 10% jump to $158.5 billion. On its own, Optum's revenue rose 9%. This growth was partially offset by the company's withdrawal from Affordable Care Act-compliant products in the individual market.
Net income has also been rising, and in 2017 it increased 50% to $10.6 billion. This increase was largely due to the higher revenues, plus the relatively static operating expenses.
With the higher net income, as well as positive changes in working capital, cash flow from operations increased 39% to $13.6 billion that year.
UnitedHealth has prospered to become the largest US health insurer, in part, by expanding into new regions through the purchase of smaller rivals and corporate health plans. It also widens its geographic reach by establishing subsidiaries in new markets, as well as by gaining new government health coverage contracts.
Growth in the diversified health services businesses, which are grouped under the Optum umbrella, have also helped UnitedHealth continue to grow. The company has been working to expand its wellness and information technology services to meet the growing needs of clients as the US health care landscape undergoes reform measures.
For instance, OptumHealth has added personalized wellness, employee assistance, onsite screening, and other services to encourage consumers to actively participate in managing their health and seek preventative care, which helps lower overall medical costs. In addition, the UnitedHealthcare plans are promoting wellness and preventative care by partnering with community organizations (such as the New York and Long Island
In 2018, a trio of leading firms -- Amazon, Berkshire Hathaway, and JPMorgan Chase -- established a partnership to enter the health care market. The companies plan to develop a new system that will help lower costs for their employees; if successful, they could widen the coverage to other customers. This move could prove a threat to for-profit insurers such as UnitedHealth.
Also in 2018 UnitedHealth announced it would terminate its contract with physician staffing firm Envision Healthcare. The companies have been locking horns over billing practices and rates. If they don't agree to a new contract, UnitedHealth's customers may be stuck with large medical bills, as oftentimes patients don't know they're being treated by an Envision practitioner until after the fact.
Mergers and Acquisitions
The highly acquisitive UnitedHealth started off 2018 by purchasing South American insurer Empresas Banmédica for $2.8 billion. Banmédica serves more than 2.1 million customers in Chile, Colombia, and Peru. Later that year, United Health acquired pharmaceutical firm Genoa Healthcare for some $2.5 billion; the deal included more than 400 pharmacy locations throughout most of the US. Genoa will be absorbed into the OptumRx pharmacy benefit unit.
UnitedHealth bought Surgical Care Affiliates, an ambulatory surgery center and surgical hospital firm, for some $2.3 billion in 2017. Surgical Care operates more than 200 surgical centers; the firm became part of the company's quickly growing OptumHealth operations, which are on track to have triple the revenues made in 2011..
Later that year, the company agreed to buy DaVita Medical Group (DMG) from dialysis specialist DaVita for $4.34 billion. DMG operates approximately 300 clinics and a handful of outpatient surgical centers in six states. The company will also become part of OptumHealth. Also in 2017, UnitedHealth bought Advisory Board's health division for $1.3 billion. That business joined Optum, as well.
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