UnitedHealth Medicare plan keeps Street on edge

By : Lewis Krauskopf - Analysis
Date posted :2009-08-18 10:55:00

NEW YORK (Reuters) - Wall Street is bracing for an aggressive strategy from UnitedHealth Group Inc (UNH.N) that stands to shake up the private market for providing coverage under Medicare, the U.S. government program for the elderly.

UnitedHealth is expected to increase its lead next year in providing Medicare Advantage plans run by private insurers when other companies may retreat in the face of anticipated falling reimbursement.

The fear from investors is that by providing generous benefits or lower premiums, UnitedHealth, the largest health insurer by market value, will dramatically shrink profit margins and undermine its 2010 earnings.

"It is adding an element of risk," CRT Capital analyst Sheryl Skolnick said.

"It's drawing a bright line and saying, 'We are taking a stand that will garner us significant market share, and we're going to cross our fingers and our toes and hope the government does not create a margin squeeze that makes that growth unprofitable.'"

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