UnitedHealth Posts Narrow Earnings Beat, Shares Suffer

UnitedHealth Group, the largest U.S. health insurer, said on Thursday that it kept fourth-quarter 2012 costs under control and increased revenue by more 11 percent, helping earnings per share rise.

The company, which provides health care benefits through both employer and government paid insurance plans and serves the individual and military markets, also backed its forecast for at least 11 percent 2013 revenue growth and said earnings would be in a range of slightly down to up 4 percent.

After the earnings report, UnitedHealth's shares fell more than one percent in pre-market trading. (Click here for the latest before-hours quotes.)

UnitedHealth's business has benefited in recent years as consumers have cut back on medical services because of the weak economy, but the company also has had to adapt to new rules for insurers associated with the 2010 Patient Prevention and Affordable Care Act.

It said that in the fourth-quarter, commercial medical costs were a bit lower than it had expected and that its medical loss ratio, or the percentage of premiums paid for medical expenses, was 80.5 percent. The Affordable Care Act last year began requiring companies to spend at least 80 or 85 percent of premiums on medical care or provide a rebate to customers.

UnitedHealth, which bought 65 percent of Brazil's Amil Participacoes for $3.5 billion during the quarter, plans to increase its stake by 25 percent through buying shares from the public during the first half of 2013. That affiliate helped push international revenues to $1 billion in the fourth quarter, the company said.

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How the US Can Save $500 Billion in Medicare: UnitedHealth

The U.S. could save more than $500 billion in Medicare and Medicaid spending over the next ten years, by more aggressively coordinating medical care for seniors and the poor, according to new research from health insurer UnitedHealth Group.

The report is aimed squarely at Washington, as leaders on Capital Hill wrangle over debt reduction options ahead of automatic budget cuts due to take effect in two months.

"It's either going to be a debate that's purely focused on cutting people's benefits, or it's going to be a debate that's focused on further cuts to doctors and hospitals," said Simon Stevens, UnitedHealth executive vice president, who chairs the insurer's Center for Health Reform & Modernization.

(Read More: Medicare Premium Increase Plan Redefines 'Well-Off')

But in the report, which Simon co-authored, he argues there should be third strategy: to focus on cutting costs, while improving care.

Under the Affordable Care Act, known as Obamacare, the government has begun to align reimbursement rates more on the quality of care for seniors in Medicare, rather than simply paying fees for each procedure.

The UnitedHealth report contends Medicare could save another $200 billion over the next ten years by more aggressively adopting cost-saving managed care initiatives.

Similarly, the report contends the federal government could save an additional $150 billion by integrating managed care for the 9 million low-income seniors and disabled who are enrolled in both Medicare and need-based Medicaid, and who account for a large share of spending in both programs.

Under Obamacare, roughly 2 million of this so-called dual-eligible population will be enrolled in coordinated care programs this year. But Stevens argues the government should expand the program faster, in order to save more.

"All of these options have got a very strong empirical, practical track record behind them," Stevens said. "We've got a sense of what works and what doesn't work."

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