The nation's five largest health insurers pocketed nearly $3.4 billion in combined profit from approximately $83.8 billion in revenue in the first quarter of this year.
UnitedHealth Group, WellPoint and Humana all saw their profits drop year-over-year, while Aetna and Cigna reported a rise in net income. All of the insurers saw revenue grow during the three months ended March 31.
1. UnitedHealth Group's earnings in the first quarter of fiscal year 2014 fell 7.8 percent, from approximately $1.2 billion in 2013 to $1.1 billion this year. Medicare Advantage cuts due to the healthcare reform law and sequestration led UnitedHealth Group to exit markets, adjust networks and reduce product offerings and benefits this year.
2. First-quarter net income at WellPoint dropped nearly 21 percent, from $885.2 million in 2013 to $701 million this year. The insurer's SG&A expense ratio was 16.2 percent in the first quarter of this year, up from 13.4 percent in 2013. New fees related to healthcare reform, spending related to healthcare reform-driven market changes and higher administrative costs from membership growth contributed to the increase.
3. Humana reported a 22.2 percent drop in first-quarter net income, from $473 million in 2013 to $368 million this year. Operating costs jumped 23.4 percent to $1.8 billion. The rise in operating costs was primarily driven by the non-deductible health insurance industry fee mandated by the Patient Protection and Affordable Care Act, acquisition costs for new Medicare Advantage members, and investment spending on the health insurance exchanges and new state-based contracts.
4. Aetna's net income rose 36 percent year-over-year, from $490.1 million in 2013 to $665.5 million this year. The increase in net income was primarily driven by the insurer's acquisition of Coventry Health Care. Additionally, higher underwriting margins in the insurer's underlying healthcare businesses — a range of medical, pharmacy, dental and behavioral health products and services — contributed to the increase in income.
5. Cigna's first-quarter net income rose more than 800 percent, from $57 million in 2013 to $528 million this year. The health insurer saw an increase in revenue from premiums and fees. Additionally, during the first quarter of 2013, Cigna reported a major drop in earnings due to its $781 million transaction with Berkshire Hathaway to exit its reinsurance business, which it had been running in run-off mode seeking no new business since 2000.
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Humana Q1 Profit Down 22%
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